Annual Report - Fatima Group | Home...

Annual R e p o r tAnnual R e p o r t

2 Core Values2 Our Vision and Mission3 Code of Conduct4 Company Information5 CompanyProfile6 ProfileoftheDirectors8 Board Structure and Committees10 ProfileoftheKeyManagement13 OrganizationChart14 Notice of 43rdAnnualGeneralMeeting15 FinancialHighlights16 HorizontalAnalysis-BalanceSheet17 VerticalAnalysis-BalanceSheet18 HorizontalAnalysis-ProfitandLoss19 VerticalAnalysis-ProfitandLoss20 Directors’ReporttotheMembers27 StatementofCompliancewiththeCodeof Corporate Governance Financial Statements

30 ReviewReporttotheMembersonStatementof Compliance

31 Auditors’ReporttotheMembers32 BalanceSheet34 ProfitandLossAccount35 StatementofComprehensiveIncome36 StatementofChangesinEquity37 CashFlowStatement38 NotestoandformingpartoftheFinancialStatements

Consolidated Financial Statements

91 Auditors’ReporttotheMembers92 ConsolidatedBalanceSheet94 ConsolidatedProfitandLossAccount95 ConsolidatedStatementofComprehensiveIncome96 ConsolidatedStatementofChangesinEquity97 ConsolidatedCashFlowStatement98 NotestoandformingpartoftheConsolidatedFinancialStatements152 PatternofShareholding154 Financial Calendar Form of Proxy

Contents

1

Our Vision and Mission

Code of Conduct

VisionTobeaworldclassmanufactureroffertilizersandancillaryproducts,withafocusonsafety,qualityandcontributionto nationaleconomicgrowthanddevelopment.Wewillcarefortheenvironmentandthecommunitiesweworkinwhilecontinuingtocreateshareholders’value.

Mission• Tobethepreferredfertilizercompanyforfarmers,businessassociatesandsuppliersthroughqualityandservice.

• Toprovideemployeesanexciting,enablingandsupportiveenvironmenttoexcelin,beinnovative,entrepreneurialinanethicalandsafeworkingplacebasedonmeritocracyandequalopportunity.

• Tobearesponsiblecorporatecitizenwithaconcernfortheenvironmentandthecommunitieswedealwith.

“Acommitmenttohonesty,ethicalconductandintegrityisthesupremeobjectiveoftheCompany.Toassistemployeesinachievingthisobjectiveandimplementitscommitment,theCompanyhasdevelopedacomprehensiveCodeofConductwhichguidesthebehaviorofdirectors,officersandemployeesoftheCompanyandisreproducedintheformofaPolicyStatementofEthicsandBusinessPractices.”

IntegrityOuractionsaredrivenbyhonesty,ethics,fairnessandtransparency

InnovationWeencouragecreativityandrecognizenewideas

TeamworkWeworkcollectivelytowardsacommongoal

Safety, Health, Environment & CSRWecareforourpeopleandthecommunitiesaroundus

Customer FocusWebelieveinlisteningtoourcustomersanddeliveringvalueinourproducts and services

ExcellenceWestrivetoexcelineverythingwedo

Valuing PeopleWevalueourpeopleasourgreatestresource

Core Values

PakarabFertilizersLimitedconductsitsbusinesswiththehighestethicalstandardsinfullcompliancewithallapplicablelaws.Honestyandintegritytakeprecedenceinallrelationshipsincludingthosewithcustomers,suppliers,employeesandotherstakeholders.

Ethics and Business PracticesWEbelieveinconductingtheCompany’sbusinessinamannerthatrespects,protectsandimprovestheenvironmentandprovidesemployeeswithasafeandhealthyworkplace.Weconductourbusinessinanenvironmentallyresponsibleandsustainablemanner.Employeesmustbecompletelyfamiliarwiththepermits,HealthSafetyandEnvironmentPolicy,locallawsandregulationsthatapplytotheirwork.

Allemployeesareexpectedtounderstandthelawsandbusinessregulationsrelatedtotheirworkandcomplyfullysothatourshareholders,employees,customers,suppliers,stakeholdersandtheGovernmenthavecompletefaithinthewayweoperateandthatourbusinessdecisionsaremadeethicallyandinthebestinterestsoftheCompany.

EmployeesareobligatedtoactinaccordancewiththeCompany’scodeofEthicsandBusinessConductandarerestrictedtousingonlylegitimatepracticesincommercialoperationsandinpromotingtheCompany’spositiononissuesbeforegovernmentalauthorities.Inducementsintendedtorewardfavorabledecisionsandgovernmentalactionsareunacceptableandprohibited.

Employeesareprohibitedfromusingtheirpositions,Companypropertyorinformationforpersonalgain,andfromcompetingwiththeCompany.EmployeesarealsoprohibitedfromtakingadvantagefromopportunitiesthatbecomeavailablethroughtheuseofCompanyinformation,propertyortheirposition.

Assets and Proprietary InformationWEconsiderourCompany’sassets,bothphysicalandintellectual,veryvaluable.Wehave,thereforeanobligationtoprotecttheseassetsintheinterestoftheCompanyanditsshareholders.

ProtectionoftheCompany’sinformationisimportantforourbusiness.Allemployeesareexpectedtoknowwhatinformationisproprietaryandwhichmustnotbedisclosedtounauthorizedsources.EmployeesareresponsibleforapplyingallavailabletoolstomanagetheCompany’sinformationresourcesandrecords.

Relations with Business PartnersWEseektodobusinesswithsuppliers,vendors,contractorsandotherindependentbusinesseswhodemonstratehighstandardsofethicalbusinessbehavior.OurCompanywillnotknowinglydobusinesswithanypersonsorbusinessesthatoperateinviolationofapplicablelawsandregulations,includingemployment,health,safetyandenvironmentallaws.Weshalltakestepstoassurethatoursuppliers,vendorsandcontractorsunderstandthestandardsweapplytoourselves,andexpectthesamefromthem.

Our EmployeesWEbelievethathighlyengagedemployeesarethekeyingredientinprofessionaldevelopmentandbusinesssuccess.Therefore,weinviteouremployeestocontributetheirbestandtoavailtheopportunitiesforimprovementandgrowth.Weareanequalopportunityemployerandpromotegenderdiversity,self-developmentandinnovation.Weprovideemployeeswithtools,techniques,andtrainingtomastertheircurrentjobs,broadentheirskills,andadvancetheircareergoals.

TheAuditcommitteeoftheBoardensuresthecomplianceofaboveprinciples.

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Company Information Company Profile

PakarabFertilizersLimitedwasestablishedasaresultofprotocolconcludedandsignedonNovember15,1972bytheGovernmentofPakistantofurtherstrengthenanddevelopfraternaltiesbetweenIslamicRepublicofPakistanandstateofAbuDhabi.

AMemorandumofUnderstandingwasconcludedbetweenPakistanIndustrialDevelopmentCorporation(PIDC)andAbuDhabiNationalOilCompanyLimited(ADNOC)onMarch7,1973.AparticipationagreementemergedonNovember1,1973toestablishajointventurefortheexpansionandmodernizationoftheoldNaturalGasFertilizerFactory(NGFF)atMultan.

TheCompanywasincorporatedonNovember12,1973.Subsequently,PIDCassigned52%ofitssharestoNationalFertilizerCorporation(NFC)ofPakistanandADNOCassigned48%ofitsshareto International Petroleum Investment Company,withapaidupcapitalofRs.743.061million.

UndertheprivatizationpolicyofGovernmentofPakistan,PakarabFertilizersLimitedwasprivatizedonJuly14,2005atacostofRs.14.125billion.ItwasacquiredbytheconsortiumofFatimaGroupandArifHabibGroup.

Underthenewmanagement,PakarabFertilizersLimitedhasundergoneextensivemodernizationandnewimprovedprocesseshavebeenintroducedtomaximizetheoutputwhileminimizingthenegativeimpactsontheenvironment.ForthisaCleanDevelopmentMechanism(CDM)plantwasinstalled,whichisthefirstprojectofitskindinPakistan.BasicaimofthisprojectistheabatementofN2O and NOXemissionsfromthestackgasesofNitricAcidplant.Thereductionofgreenhouseeffectofthesegasesshowsthenewmanagement’scommitmenttowardsacleanerenvironment.

PakarabFertilizersLimitedislocatedatKhanewalRoad,Multan.Thesiteareacomprises302acres,whichincludesareaforthefactoryandthehousingcolonywithallamenitiesincludingmedicalcentre,school,managementandstaffclubsforrecreationofemployeesandtheirfamilies,etc.

Board of DirectorsMr.ArifHabibChairman

Mr.FawadAhmedMukhtarChiefExecutiveOfficer

Mr.FazalAhmedSheikhExecutiveDirector

Mr.FaisalAhmedMukhtarNon-ExecutiveDirector

Mr.NasimBegNon-ExecutiveDirector

Mr.RehmanNaseemNon-ExecutiveDirector

Mr.Abdus SamadNon-ExecutiveDirector

Mr.MuhammadKashifHabibNon-ExecutiveDirector

Audit CommitteeMr.NasimBegChairman

Mr.FazalAhmedSheikhMember

Mr.Rehman NaseemMember

Mr.MuhammadKashifHabibMember

Human Resource andRemuneration CommitteeMr.NasimBegChairman

Mr.AbdusSamadMember

Mr.FaisalAhmedMukhtarMember

Mr.Rehman NaseemMember

Chief Financial OfficerMr.ArifHamidDar

Company SecretaryMr.AusafAliQureshi

Key ManagementMr.M.AbadKhanAdvisortoCEO

Mr.ArifUrRehmanChiefManufacturingOfficer

Mr.QadeerAhmedKhanDirectorSpecialProjects

Mr.AhsenUdDinDirectorTechnologyDivision

Mr.HaroonWaheedGroupHeadofHumanResource

Mr.IftikharMahmoodBaigDirectorBusinessDevelopment

Mr.FuadImranKhanChiefInformationOfficer

Mr.JavedAkbarHead of Procurement

Mr.KashifMustafaKhanInchargeofInternalAudit

Brig.(Retd)AdeebAzamGeneralManagerAdministration

Legal AdvisorsM/s.Chima&IbrahimAdvocates1-A/245,TufailRoad,LahoreCantt.

AuditorsA.F.Ferguson&Co.,CharteredAccountants23-C,AzizAvenue,CanalBank,GulbergV,Lahore-54660.Tel:04235715864-71F-04235715872

Cost AuditorsErnst&YoungFordRhodesSidatHyder&CoCharteredAccountants96-B-1, 4th Floor, PaceMall Building,M.M.AlamRoad,Gulberg-IILahore.Tel:+924235778402-11Fax:[email protected]/pk

BankersAlliedBankLimitedAl-BarakaBank(Pakistan)LimitedAskariBankLimitedBankIslamiPakistanLimitedBankAlfalahLimitedBurjBankLimitedCitibank,N.A.DubaiIslamicBankPakistanLimitedFaysalBankLimitedHabibBankLimitedHabibMetropolitanBankLimitedMCBBankLimitedMeezanBankLimitedNationalBankofPakistanPakOmanInvestmentCompanyLimitedPakistanKuwaitInvestmentCompany(Private)LimitedPAIRInvestmentCompanyLimitedSindhBankLimitedStandardCharteredBank(Pakistan)LimitedSummitBankLimitedSoneriBankLimitedUnitedBankLimitedZaraiTaraqiatiBankLimited

Registered / Head OfficeE-110,Khayaban-e-Jinnah,LahoreCantt.,Pakistan.UAN:111-FATIMA(111-328-462)Fax:042-36621389E-mail:[email protected]:www.fatima-group.com

Plant SiteKhanewalRoad,MultanTel: 061 9220022Fax: 061 9220021

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Profile of the Directors

Mr. Arif HabibChairman/Non-ExecutiveDirector

Mr. Fawad Ahmed MukhtarChiefExecutiveOfficer/Director

Mr. Fazal Ahmed SheikhExecutiveDirector

Mr. Rehman NaseemNon-ExecutiveDirector

Mr.ArifHabibistheChairmanofPakarabFertilizersLimited.HeisalsotheChiefExecutiveOfficerofArifHabibCorporationLimited,directorofPakarabEnergyLimitedandChairmanofFatimafertLimited,FatimaFertilizerCompanyLimited,AishaSteelMillsLimitedandJavedanCorporationLimited.Mr.ArifHabibremainedtheelectedPresident/ChairmanofKarachiStockExchangeforsixtimesinthepastandwasaFoundingMemberandChairmanoftheCentralDepositoryCompanyofPakistanLimited.HehasservedasaMemberofthePrivatizationCommission,BoardofInvestment,TariffReformsCommissionandSecurities&ExchangeOrdinanceReviewCommittee.OvertheyearshehasbeennominatedontheBoardofDirectorsofanumberofcompaniesbytheGovernmentofPakistan.Presently,heisaDirectorontheBoardsofPakistanInternationalAirlinesandSuiNorthernGasPipelinesLimited.Mr.Habibparticipatessignificantlyinwelfareactivities.HeisoneofthetrusteesofFatimidFoundationandMemonHealth&EducationFoundationaswellasadirectorofPakistanCentreforPhilanthropyandKarachiEducationInitiative.

Mr.FawadAhmedMukhtaristheChiefExecutiveOfficerandDirectoroftheCompany.Hehasrichexperienceofmanufacturingandindustrialmanagement,andinadditiontobeingasuccessfulbusinessleader,heisalsoarenownedphilanthropist.Followinghisgraduation,hehasspent30yearsindevelopinghisfamilybusinessintoasizableconglomerate.

Mr.FawadMukhtarleadsseveralcommunityserviceinitiativesofhisgroupincludingtheFatimaFertilizerTrustandWelfareHospital,FatimaFertilizerEducationSocietyandSchool,MukhtarA.SheikhWelfareTrustetc.HeisalsotheChairmanofRelianceWeavingMillsLimited,FatimaEnergyLimited,RelianceCommodities(Private)Limited,FatimaSugarMillsLimited,FatimaHoldingLimited,AirOne(Private)Limited,andisalsotheCEOofFatimaFertilizerCompanyLimitedandFatimafertLimited.HeisalsotheDirectorofFatimaTransmissionCompanyLimitedandPakarabEnergyLimited.Inaddition,heismemberBoardofDirectorsof“TheNationalManagementFund”–aparentbodyofLahoreUniversityofManagementSciences(LUMS).

Mr.RehmanNaseemisaDirectoroftheCompany.HeobtainedaBachelorofEconomicsDegreefromColumbiaUniversity,NewYork.HeistheChiefExecutiveofAhmedFineTextileMillsLimitedandRehmanAmirFabricsLimited.HeisalsodirectorofFazalClothMillsLimited,FazalWeavingMillsLimited,FazalRehmanFabricsLimited,ZafarNasirOilExtractionLimited,HussainGinneriesLimited,AmirFineExports(PVT)Limited,FazalFarms(Pvt)LimitedandFatimaEnergyLimited.

Mr.FazalAhmedSheikhisaDirectoroftheCompany.HeholdsadegreeinEconomicsfromtheUniversityofMichigan,AnnArbor,USA.HehasplayedastrategicroleinFatimaGroup’sexpansionandsuccess.HeistheCEOofRelianceWeavingMillsLimited,FatimaEnergyLimited,FatimaElectricCompanyLimited,FatimaTransmissionCompanyLimited,PakarabEnergyLimitedandAirOne(Private)Limited.Inaddition,heisalsothememberBoardofDirectorsatFatimaFertilizerCompanyLimited,FatimafertLimited,RelianceCommodities(Private)Limited,FatimaSugarMillsLimited,FatimaHoldingLimitedandFazalClothMillsLimited.

Mr. Faisal Ahmed Mukhtar Non-ExecutiveDirector

Mr. Nasim BegNon-ExecutiveDirector

Mr. Abdus SamadNon-ExecutiveDirector

Mr. Muhammad Kashif HabibNon-ExecutiveDirector

Mr.FaisalAhmedMukhtarisaDirectoroftheCompany.HeholdsaLawdegreefromBahauddinZakariyaUniversity,Multan.HeistheformerMayorandCityDistrictNazimofMultan,andcontinuestoleadwelfareeffortsinthecity.HeisalsotheChairmanofWorkersWelfareBoardatPakarabFertilizersLimitedandismemberBoardofDirectorsatFatimaFertilizerCompanyLimited,FatimafertLimited,FatimaSugarMillsLimited,FatimaHoldingLimited,FatimaEnergyLimited,FatimaElectricCompanyLimited,PakarabEnergyLimited,RelianceWeavingMillsLimited,RelianceCommodities(Private)Limited,FazalClothMillsLimited,andAirOne(Private)Limited.AdditionallyhewasalsoamemberintheProvincialFinanceCommission(Punjab),SteeringCommitteeofSouthernPunjabDevelopmentProjectandDecentralizationSupportProgram.

Mr.NasimBegisaDirectoroftheCompany.HequalifiedasaCharteredAccountantin1970;healsoholdsaBachelor’sdegreeinCommercefromtheKarachiUniversity.HeisthefounderChiefExecutiveofArifHabibConsultancyandwasthefounderChiefExecutive(nowViceChairman)ofMCB-ArifHabibSavings&InvestmentsLtd(formerlyArifHabibInvestmentsLimited),aleadingAssetManagementCompanyofPakistan.NasimBegservesonontheBoardsofseveralArifHabibGroupcompanies,aswellassomeothers.HechairstheBoardsofArifHabibDolmenREITManagementLimitedandPowerCementLimited.Hehasexperienceofoverforty-fiveyearsinindustryandthefinancialservicessector,inboththedomesticandinternationalmarkets.HewasapartofataskforcesetupbytheSecurities&ExchangeCommissionofPakistan(SECP),whichdevelopedandintroducedtheVoluntaryPensionSystem.HewasthefounderChairmanoftheSECPsponsoredInstituteofCapitalMarketsandhasalsobeenaMemberofthePrimeMinister’sEconomicAdvisoryCouncil.

Mr.MuhammadKashifHabibisaDirectoroftheCompany.HeisaCharteredAccountantfromtheInstituteofCharteredAccountantsofPakistan(ICAP)andhascompletedhismandatoryArticleswithM/s.A.F.Ferguson&Co.CharteredAccountants.

HeistheCEOofPowerCementLimitedandSafeMixConcreteLimited.HeisalsoDirectorofArif HabibCorporationLimited,FatimaFertilizerCompanyLimited,FatimafertLimited,BubberSher(Pvt.)Limited,RelianceSacksLimited,JavedanCorporationLimited,AishaSteelMillsLimited,ArifHabibDolmenREITManagementLimited,RotocastEngineeringCompany(Pvt.)LimitedandMemonHealth&EducationFoundation.

Mr.AbdusSamadisaDirectoroftheCompany.HeholdsaMaster’sdegreeinBusinessAdministrationandhasmorethan15yearsofexperience,including9yearsofworkinginthefinancialservicesindustryinvariousseniormanagementroles.HebeganhiscareerwithArifHabibCorporationLimited(theholdingcompanyofArifHabibgroup)andhasservedthecompanyinvariousexecutivepositionsincludingExecutiveSalesandBusinessPromotions,CompanySecretary,HeadofMarketing,etc.InSeptember2004,hewasappointedtheChairmanandChiefExecutiveofArifHabibLimited.AsChairmanhewasresponsibleforthestrategicdirectionofthecompanyandwasactivelyinvolvedincapitalmarketoperationsandcorporatefinanceactivitiessuchasservingcorporateclients,institutionalclients,highnetworthindividuals,andraisingfundsforclientsthroughIPO’s,privateplacementsetc.HeresignedfromthatpositioninJanuary2011.Mr.SamadA.HabibistheChiefExecutiveofJavedanCorporationLimitedanddirectorofArifHabibCorporationLimited,ArifHabibEquity(Pvt.)Limited,ArifHabibDolmenREITManagementLimited,MCB-ArifHabibSavings&InvestmentsLimited,InternationalComplexProjectsLimited,NooriabadSpinningMills(Pvt.)Limited,PakarabFertilizersLimited,PakistanOpportunitiesLimited,PowerCementLimited,RealEstateModarabaManagementCompanyLimited,RotocastEngineeringCompany(Pvt.)LimitedandSafemixConcreteLimited.

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Board Structure and Committees

Board StructurePFL’sBoardiscomprisedofeightdirectorswhohavebeenelectedbytheshareholdersforatermofthreeyearsexpiringonDecember31,2018.OtherthantheChiefExecutiveOfficer(CEO),thereisoneexecutivedirectorandsixnon-executivedirectorsontheBoard.TheChairmanoftheBoardisanon-executivedirector. TheBoardprovidesleadershipandstrategicguidancetotheCompany,overseestheconductofbusinessandpromotestheinterestsofallstockholders.Itreviewscorporatepolicies,overallperformance,accountingandreportingstandardsandothersignificantareasofmanagement,corporategovernanceandregulatorycompliance. TheBoardisheadedbytheChairmanwhomanagestheBoard’sbusinessandactsasitsfacilitatorandguide.TheBoardisassistedbyanAuditCommitteeandaHumanResourceandRemunerationCommitteewhiletheCEOcarriesresponsibilityforday-to-dayoperationsoftheCompanyandexecutionofBoardpolicies.

Board CommitteesThestandingcommitteesoftheBoardare:

Audit Committee

Composition

TheAuditCommitteeconsistsoffourmembersoftheBoard.MajorityofthemembersoftheAuditCommitteearenon-executiveincludingtheChairman.Themembersare:

1.Mr.NasimBeg-Chairman2.Mr.FazalAhmedSheikh-Member3.Mr.RehmanNaseem-Member4.Mr.MuhammedKashifHabib-Member

Terms of Reference

Inadditiontoanyotherresponsibilitieswhichmaybeassignedfromtimeto

timebytheBoard,themainpurposeoftheAuditComitteeistoassisttheBoardbyperformingthefollowingmainfunctions:

• tomonitorthequalityandintegrityoftheCompany’saccountingandreportingpractices;

• tooverseetheperformanceofCompany’sinternalauditfunction;

• toreviewtheexternalauditor’squalification;independence,performanceandcompetence;and

• tocomplywiththelegalandregulatoryrequirements,Company’sby-lawsandinternalregulations.

TheTermsofReferenceoftheAuditCommitteehavebeendrawnupandapprovedbytheBoardofDirectorsincompliancewiththeCodeofCorporateGovernance.InadditiontocompliancewithCodeofCorporateGovernance,theAuditCommitteecarriesoutthefollowingdutiesandresponsibilitiesfortheCompanyasperitsTermsofReference:

a)determinationofappropriatemeasurestosafeguardtheCompany’sassets;

b)reviewofpreliminaryannouncementsofresultspriortopublication;

c)reviewofquarterly,half-yearlyandannualfinancialstatementsoftheCompany,priortotheirapprovalbytheBoardofDirectors,focusingon:

• majorjudgmentalareas;

• significantadjustmentsresultingfromtheaudit;

• thegoing-concernassumption;

• anychangesinaccountingpoliciesandpractices;

• compliancewithapplicableaccountingstandards;and

• compliancewithlistingregulationsandotherstatutoryandregulatoryrequirements.

d)facilitatingtheexternalauditanddiscussionwithexternalauditorsof

majorobservationsarisingfrominterimandfinalauditsandanymatterthattheauditorsmaywishtohighlight(intheabsenceofmanagement,wherenecessary);

e)reviewofmanagementletterissuedbyexternalauditorsandmanagement’sresponsethereto;

f) ensuringcoordinationbetweentheinternalandexternalauditorsoftheCompany;

g)reviewofthescopeandextentofinternalauditandensuringthattheinternalauditfunctionhasadequateresources and is appropriately placed withintheCompany;

h)considerationofmajorfindingsofinternalinvestigationsandmanagement’sresponsethereto;

i) ascertainingthattheinternalcontrolsystemincludingfinancialandoperationalcontrols,accountingsystemandreportingstructureareadequateandeffective;

j) reviewoftheCompany’sstatementon internal control systems prior toendorsementbytheBoardofDirectors;

k) institutingspecialprojects,valueformoneystudiesorotherinvestigationsonanymatterspecifiedbytheBoardofDirectors,inconsultationwiththeChiefExecutiveandtoconsiderremittanceofanymattertotheexternalauditorsortoanyotherexternalbody;

l) determinationofcompliancewithrelevantstatutoryrequirements;

m)monitoringcompliancewiththebestpracticesofcorporategovernanceandidentificationofsignificantviolationsthereof;and

n)considerationofanyotherissueormatterasmaybeassignedbytheBoardofDirectors.

Human Resource and Remuneration Committee

Composition

TheHumanResourceandRemunerationCommitteeconsistsoffourmembersoftheBoard.AllthemembersoftheCommitteearenon-executivedirectorsincludingtheChairman.

Themembersare:

1.Mr.NasimBeg-Chairman2.Mr.AbdusSamad-Member3.Mr.FaisalAhmedMukhtar-Member4.Mr.RehmanNaseem-Member

Terms of Reference

TheHumanResourceCommitteeisameansbywhichtheBoardprovidesguidanceonhumanresourcesexcellence.Thespecificresponsibilities,authoritiesandpowersthattheCommitteecarriesoutonbehalfoftheBoard are as follows:

1. Duties and Responsibilities

TheCommitteeshallcarryoutthedutiesbelowfortheCompany:

1.1 toreviewandrecommendtheannualCompensationstrategywithfocusontheannualbudgetforHeadcountandSalariesandwages;

1.2 toreviewandrecommendtheannualBonusandIncentiveplan;

1.3 toreviewandrecommendthecompensationoftheChiefExecutiveandExecutiveDirectors;

1.4 toassisttheBoardinreviewingandmonitoringthesuccessionplansofkeypositionsintheCompany;

1.5 toreviewandmonitorprocessesandinitiativesrelatedtoworkenvironmentandculture;

1.6 toperformsuchotherdutiesandresponsibilitiesasmaybeassignedtimetotimebytheBoardofDirectors.

2. Reporting Responsibilities

2.1 TheCommitteeChairmanshallreportformallytotheBoardonitsproceedingsaftereachmeetingonallmatterswithinitsdutiesandresponsibilities;

2.2 TheCommitteeshallmakewhateverrecommendationstotheBoarditdeems appropriate on any area withinitsremitwhereactionorimprovementisneeded;

2.3 TheCommitteeshall,ifrequestedbytheBoard,compileareporttoshareholdersonitsactivitiestobeincludedintheCompany’sAnnualReport.

3. Authorities and Powers

TheCommitteeisauthorisedandempowered:

3.1 ToseekanyinformationitrequiresfromanyemployeeoftheCompanyinordertoperformitsduties;

3.2 Toobtain,attheCompany’sexpense,outsidelegalorotherprofessional advice on any matter withinitstermsofreference;and

3.3 TocallanyemployeetobequestionedatameetingoftheCommitteeasandwhenrequired.

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Profile of the Key Management

Mr. M. Abad KhanAdvisortoCEO

Mr. Arif Hamid DarChiefFinancialOfficer

Mr Arif Ur RehmanChiefManufacturingOfficer

Mr. Haroon WaheedGroupHeadofHR

Mr. Qadeer Ahmed KhanDirectorSpecialProjects

Mr. Iftikhar Mahmood BaigDirectorBusinessDevelopment

Mr. Ausaf Ali QureshiCompany Secretary

Mr. Fuad Imran KhanChiefInformationOfficer

Mr.M.AbadKhangraduatedinMechanicalEngineeringfromUETLahoreandreceivedextensivetraininginFertilizermanufacturingfromabroad.Overthelast55yearsofhiscareer,heremainedpartofthegrowthoffertilizerindustryinPakistan.

HewaspartoftheteamthatcommissionedPakistan’sfirstUreaPlantundertheaegisofPIDC.HeservedExxonChemicalPakistanLtd.for15yearsmostlyatseniormanagementpositionsinmanufacturing.HeledFaujiFertilizerCo.manufacturingfor14yearsasGeneralManagerPlant.Duringthisperiod,Plantoperated par excellence and itsdesigncapacityincreasedtomorethandouble.In2001,whenFFBLfacedseriouschallenges,hetookresponsibilityasheadofthemanufacturingandwasinstrumentalinamajorrevampwhichimprovedthecapacityby25%.

HehasbeenwithFatimaGroupforthelast10yearsandplayedasignificantroleinestablishmentandprogressofFatimaFertilizerplantand operational improvements in PakarabFertilizers.

Duringthecourseofalongcareer,hehadextensiveinternationalexposuresthroughseminars,symposiumsandtrainingsincludingtheoneatHarvardBusinessSchool.

HeisalsoDirectorofseveralotherGroup Companies namely Fatima EnergyLtd,PakarabEnergyLtd,FatimafertLtd,BubberSher(Pvt)Ltd,FatimaVentures(Pvt)LtdandFatimaElectricCoLtd.

Mr.ArifHamidDarisafellowmemberoftheInstituteofCharteredAccountantsofPakistanandgottrainingwithA.F.Ferguson&Co.CharteredAccountant.Hehas14yearsofdiversifiedexperienceofhandlingfinance,businessplanning,aftersalesservicesfunctionswithHondaAtlasCars(Pakistan)Ltd,asubsidiaryofHondaMotorCompany,Japan.HehasjoinedtheCompanyinearly2010.

Mr.QadeerAhmedKhanhasdonehisMSinPetrochemicalsandHydrocarbonsfromtheInstituteofScienceandTechnology,UniversityofManchester,England.Hehasavastexperienceofworkinginchemicalsandfertilizerindustries.Hehasover32yearsofexperienceatEngroChemicalsandEngroPolymers,whereheheldvariousseniormanagementpositions.

IftikharMahmoodBaigisDirectorBusinessDevelopmentofFatimaGroup.HeisaFellowMemberofInstituteofCharteredSecretariesandManagersofPakistan.Hehas32yearsofFinancial&Commercialexperience.OverthecourseofhistenurewithFatimaGroup,heplayedaninstrumentalroleinobtainingnaturalgasallocationof110MMCFDin2004andsuccessfullyachievingFinancialCloseofthelargestrupeesyndicationofRs.23billionin2006forthegreenfieldfertilizermanufacturingcomplexofFatimaFertilizerCompanyLimited(InvestmentUS$750million).HealsoplayedapivotalroleintheacquisitionofPakarabFertilizersLimitedin2005.HewasassociatedwithFatimaEnergyLimitedfromconceptualstageuntilitsimplementation.IftikhariscurrentlyengagedinGasmanagementandLNGsourcingforFertilizerPlants,GovernmentRegulations/RegulatoryApprovals and development of NewVenturesinPowerSectors.

Mr.Arif-ur-Rehmanisachemicalengineerandhasover34yearsofexperienceinthefertilizerandpetrochemicalindustries.Hehasbeenapartofnumberofsuccessfulprojectsfromconstructiontocommissioning.TheseincludeFaujiFertilizerCompany,FaujiFertilizerBinQasimandICI(PTAPlant).Healsoworkedonvariousforeignassignments.

Mr.HaroonWaheedhasdonehisLLMfromMonashUniversity,Melbourne,Australia.Hehasover 21 years of national and internationalbroadbasedfunctionalbusinessexperiencewithUnilever,andhasbeenassociatedwithPakistanSocietyofHRManagementasPresident.HaroonalsorepresentsintheHR,managementandleadershipdevelopment conferences atnationallevel.HewontheInternationalHRLeadershipAwardinLondonandTalentManagementAwardinSingaporein2010.

Mr.AusafAliQureshiisaFellowMemberofInstituteofCharteredAccountantsofPakistan.HejoinedtheGroupin May 2010 as Company Secretarywithadditionalresponsibilityforinvestorrelations.Hehasover33yearsofexperiencewithFaujiFertilizer,PakistanInternationalAirlines(Holdings)andBristol-MyersSquibb(BMS).Inhis20years’pluscareeratBMS,heheldvariousseniormanagementpositionsinPakistan,SouthKorea,EgyptandSingaporeintheareasofnance,corporatecomplianceandstrategicprojectplanning.

Dr.FuadImranKhanholdsaPh.D.DegreeinComputerInformation and Control EngineeringandaMaster’sdegreeinElectricalandComputerEngineeringfromUniversityofMichigan,USAandhasaBachelor’sdegreeinElectricalEngineeringfromMassachusettsInstituteofTechnology.HehasworkedasHeadofInformationTechnologyatRoshanAfghanistanandPTCL.Dr.Fuad’slastassignmentwaswithWaridTelecomastheirChiefInformationOfficer.

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Profile of the Key Management Organization Chart

Board of Directors

HR & RemunerationCommittee

Audit Committe

Advisor to CEO

Director Special Projects

Director Marketing

Group Head of Human Resource

Chief Manufacturing Officer

Head of InternalAudit

Director BusinessDevelopment

Chief Information Officer

Head of Procurement

General Manager Administraiton

Chief FinancialOfficer

Company Secretary

Chief Executive Officer

Mr. Javed AkbarHead of Procurement

Kashif Mustafa Khan InchargeofInternalAudit

Brig. (Retd) Adeeb AzamGeneralManagerAdministraiton

Mr.JavedAkbarisaMechanicalEngineerfromNEDUniversityofEngineeringandTechnologyKarachi,andalsodidhisgraduationincomputerscience from university of Mississippi,USA.Hebroughtwithhimanexperienceofaround27years,outofwhichmorethan17yearsisintheareaofsupplychainwithmultinationalcompaniesinPakistanincludingPhilips,Alcatel,MobilinkandPTCL.HehasattendedInternationalTrainingCoursesonmanagementandleadershipfrom world renowned institutions likeInsead,HarvardandMIT.

Brig.AdeebAzamjoinedPakarabFertilizersLimited’sAdministrative Services department as General ManagerAdministration.Hehaspreviouslyworkedfor34yearswithPakistanArmy.BrigAdeebAzamhascompletedhisMaster’sinArtandScienceofWarfare,WarStudiesandNationalSecurityStrategy.

Mr.KashifMustafaKhanisaFellowMemberofInstituteofCostandManagementAccountantsofPakistan.Hehasdiversiedexperienceofover21yearsintheeldofnancialmanagement,regulatorycompliance,taxation,internationalreportingandbusinessplanning.HehadworkedwithGlaxoSmithKlinefor3 years and Honda Atlas Cars (Pakistan)Limitedfor14yearbeforejoiningtheCompanyin2010.HehasbeenservingasHead of Accounts and Taxation priortohispresentroleintheOrganization.

12

ANNUAL REPORT 2015

13

Noticeof the 43rd Annual General Meeting

Notice is hereby given that the 43rd Annual General Meeting of the shareholders of PAKARAB FERTILIZERS LIMITED (the‘Company’or‘PFL’)willbeheldonSaturday,April30,2016at12:30p.m.atE-110,Khayaban-e-Jinnah,LahoreCantt.,totransactthefollowingbusiness:

Ordinary Business

1. ToconfirmminutesoftheExtraordinaryGeneralMeetingheldonDecember31,2015.

2. Toreceive,considerandadopttheauditedfinancialstatementsoftheCompanytogetherwiththeDirectors’andAuditors’ReportsthereonfortheyearendedDecember31,2015togetherwiththeauditedconsolidatedfinancial statements of Pakarab Fertilizers Limited and subsidiary Reliance Sacks Limited for the year endedDecember31,2015andtheAuditors’Reportsthereon.

3. ToappointAuditorsfortheyearendingDecember31,2016andtofixtheirremuneration.TheAuditCommitteeandtheBoardofDirectorshaverecommendedforreappointmentofM/sA.F.Ferguson&Co.,CharteredAccountantsasexternalauditors.

Other Business

4. TotransactanyotherbusinesswiththepermissionoftheChair.

ByorderoftheBoard

AusafAliQureshi

Lahore;April09,2016 Company Secretary

Notes:

1. ThesharetransferbooksoftheCompanywillremainclosedfromApril24,2016toApril30,2016(bothdaysinclu-sive).TransfersreceivedinorderattheregisteredofficeoftheCompanybythecloseofbusinessonApril23,2016willbetreatedintime.

2. Amemberentitledtoattendandvoteatthemeetingmayappointanothermemberashis/herproxywhoshallhavesuchrightsasrespectsattending,speakingandvotingatthemeetingasareavailabletoamember.

3. ProxiesinordertobeeffectivemustbereceivedbytheCompanyattheRegisteredOfficenotlaterthan48hoursbeforethetimeforholdingmeeting,dulysignedandstampedandwitnessedbytwopersonswiththeirnames,address,NICnumberandsignatures.

4. Shareholdersarerequestedtoimmediatelynotifythechangeoftheiraddress,ifany.

Financial HighlightsSix years at a glance (Rs. in millions except share data and ratios)

Dec31, Dec31, Dec31, Dec31, Dec31, Dec31, 2010 2011 2012 2013 2014 2015Income Statement

Turnover Rs. 18,248 16,701 8,136 7,428 14,248 21,920CostofGoodsSold Rs. (9,051) (7,188) (6,221) (7,143) (12,264) (17,353)GrossProfit Rs. 9,197 9,513 1,915 286 1,984 4,568AdminCost Rs. (780) (969) (1,165) (888) (731) (879)DistributionCost Rs. (994) (829) (299) (495) (686) (897)FinancialCost Rs. (3,589) (3,472) (2,610) (1,579) (1,626) (1,677)OtherExpenses Rs. (386) (510) (218) (382) (1) (333)InterestIncome Rs. 543 736 685 63 OtherIncome Rs. 866 1,119 843 198 1,036 333Re-measurementgain/(loss) Rs. (121) 741 (47) - - -Sharegain/(loss)ofassociatedcompany Rs. (39) (18) - - - -ProfitbeforeTax Rs. 4,697 6,311 (896) (2,798) (25) 1,114ProfitafterTax Rs. 3,232 4,590 (240) (1,825) (45) 2,460EBITDA Rs. 8,943 10,665 2,929 (745) 2,041 3,555

Balance Sheet

PaidupCapital Rs. 4,500 4,500 4,500 4,500 4,500 4,500Shareholder’sEquityincludingrevaluationreserve Rs. 10,224 17,856 15,396 13,584 16,273 19,411Longtermborrowings Rs. 13,372 8,484 4,559 1,466 1,891 4,203Capitalemployed Rs. 33,989 43,754 37,077 31,518 32,303 36,264Deferredliabilities Rs. 5,631 11,058 11,038 10,059 10,303 8,105Property,plant&equipment Rs. 21,916 37,937 37,290 37,114 39,909 39,194Longtermassets Rs. 33,178 46,336 41,188 40,945 43,735 43,027Netcurrentassets/Workingcapital Rs. 811 (2,456) (4,111) (10,188) (9,620) (6,762)TotalAssets Rs. 50,637 65,341 54,636 48,148 52,727 65,680

Cash Flows:

Operatingactivities Rs. 4,109 4,023 (1,179) (682) 2,797 (10,603)Investingactivities Rs. (2,989) (710) 5,870 2,790 345 50Financingactivities Rs. (316) (2,643) (5,665) (1,864) (1,789) (857)Changesincash&cashequivalents Rs. 804 669 (973) 244 1,352 (11,410)Cash&cashequivalents-Yearend Rs. (4,517) (3,847) (4,820) (4,576) (3,224) (14,634)

Key Indicators:

Operating: GrossProfitMargin % 50.40 56.96 23.54 3.84 13.92 20.84Pretaxmargin % 25.74 37.79 (11.01) (37.67) (0.17) 5.08Netprofitmargin % 17.71 27.48 (2.95) (24.57) (0.31) 11.22EBITDA%agetosale % 49.01 63.86 36.00 (10.04) 14.33 16.12Earningpershare(Rs.)Basic Rs. 7.18 10.20 (0.53) (4.06) (0.10) 5.47

Performance:

BookValuepershare(Excludingrevaluationsurplus) Rs. 27.22 23.14 17.63 13.78 13.96 19.75BookValuepershare(Includingrevaluationsurplus) Rs. 32.72 49.68 44.21 40.19 46.16 53.14Returnonassets % 6.38 7.02 (0.44) (3.79) (0.08) 3.74TotalAssetsTurnover Times 0.36 0.26 0.15 0.15 0.27 0.33FixedAssetsTurnover Times 0.82 0.44 0.22 0.20 0.36 0.56Debtorsturnover Times 11.13 12.19 11.14 20.52 83.57 15.59Debtorsturnover Days 33 29.95 33 18 4 23Inventoryturnover Times 1.82 1.45 1.32 1.40 3.07 2.39Inventoryturnover Days 200 251 276 261 119 153ReturnonShareCapital % 71.82 102.00 (5.33) (40.56) (0.99) 54.66ReturnonEquity(excludingrevaluationsurplus) % 26.39 44.08 (3.03) (29.44) (0.71) 27.67

Leverage:

Debt:Equity 59:41 59:41 54:46 43:57 36:64 49:51Interestcover 1.31 1.82 (0.66) (0.77) (0.02) 0.66

Liquidity:

CurrentRatio 1.05 0.89 0.77 0.41 0.48 0.77Quickratio 0.73 0.67 0.49 0.20 0.30 0.42

Valuation

Earningspershare(beforetax) Rs. 10.44 14.02 (1.99) (6.22) (0.05) 2.48Earningspershare(aftertax) Rs. 7.18 10.20 (0.53) (4.06) (0.10) 5.47EarningsGrowth % (31.79) 42.02 (105.23) 660.45 97.55 5,608Cashdividend % – – – – – –Bonusdividend % – – – – – –Speciedividend % 130 148 49 – – –

14

ANNUAL REPORT 2015

15

Rupees(Million) %Change

Dec31, Dec31, Dec31, Dec31, Dec31, Dec31, 2010vs 2011vs 2012vs 2013vs 2014vs 2015vs 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014

Issued,subscribedandpaidupcapital 4,500 4,500 4,500 4,500 4,500 4,500 8.89 6.89 8.24 9.35 8.53 6.85

Reserves 7,548 5,714 3,432 1,700 1,782 4,389 14.91 8.74 6.28 3.53 3.38 6.68

Sharedepositmoney 200 200 – – – – 0.39 0.31 – – – –

Revaluationreserve 2,476 11,942 11,964 11,884 14,491 15,023 4.89 18.28 21.90 24.68 27.48 22.87

14,724 22,356 19,896 18,084 20,773 23,911 29.08 34.21 36.42 37.56 39.40 36.41

Non-Current LiabilitiesLongtermfinances 13,372 8,484 4,559 1,466 1,891 4,203 26.41 12.98 8.34 3.04 3.59 6.40

Supplier’scredit-secured – 1,796 1,488 1,100 1,100 – – 2.75 2.72 2.28 2.09 –

Liabilitiesagainstassetssubjecttofinancelease 218 138 50 – – – 0.43 0.21 0.09 – – –

Payableagainstminingrights – – – – – – – – – – – –

Longtermdeposits 44 48 46 47 48 45 0.09 0.07 0.08 0.10 0.09 0.07

Deferredliabilities 57 91 115 126 116 133 0.11 0.14 0.21 0.26 0.22 0.20

Deferredtaxation 5,574 10,967 10,923 9,933 10,187 7,972 11.01 16.78 19.99 20.63 19.32 12.14

19,265 21,524 17,181 12,672 13,342 12,353 38.05 32.94 31.45 26.32 25.30 18.81

Current Liabilities Currentportionoflongtermliabilities 4,009 6,335 4,878 3,132 901 1,072 7.92 9.70 8.93 6.51 1.71 1.63

Financesundermarkuparrangements-secured 4,702 4,644 5,814 4,736 4,637 15,152 9.29 7.11 10.64 9.84 8.80 23.07

Derivativefinancialinstruments – – – – – – – – – – – –

PayabletoPrivatizationCommissionofPakistan 2,198 2,198 2,198 2,198 2,198 2,198 4.34 3.36 4.02 4.56 4.17 3.35

Shorttermloanfromrelatedparty-secured – – – 3,000 3,000 2,200 – – – 6.23 5.69 3.35

Tradeandotherpayables 4,458 3,121 3,225 3,989 7,555 8,345 8.80 4.78 5.90 8.28 14.33 12.71

Accruedfinancecost 650 677 366 337 320 449 1.28 1.04 0.67 0.70 0.61 0.68

Dividendpayable – 3,755 1,078 – – – – 5.75 1.97 – – –

Provisionfortaxation 631 731 – – – – 1.25 1.12 – – – –

16,648 21,461 17,559 17,391 18,611 29,416 32.88 32.84 32.14 36.12 35.30 44.79

50,637 65,341 54,636 48,148 52,727 65,680 100.00 100.00 100.00 100.00 100.00 100.00

Rupees(Million) %Change Dec31, Dec31, Dec31, Dec31, Dec31, Dec31, 2010vs 2011vs 2012vs 2013vs 2014vs 2015vs 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014Non-Current Assets Property,plantandequipment 21,916 37,937 37,290 37,114 39,909 39,194 43.28 58.06 68.25 77.08 75.69 59.67

Assetssubjecttofinancelease 283 230 121 51 – – 0.56 0.35 0.22 0.11 – –

Intangibles 183 161 149 144 125 94 0.36 0.25 0.27 0.30 0.24 0.14

Goodwill 3,305 3,305 3,305 3,305 3,305 3,305 6.53 5.06 6.05 6.86 6.27 5.03

Investments-relatedparty 2,930 130 262 295 361 405 5.79 0.20 0.48 0.61 0.68 0.62

Loantosubsidiary 4,516 4,516 – – – – 8.92 6.91 – – – –

Securitydeposits 45 57 61 36 35 29 0.09 0.09 0.11 0.08 0.07 0.04

33,178 46,336 41,188 40,945 43,735 43,027 65.52 70.91 75.39 85.04 82.95 65.51

Current Assets Storesandspareparts 2,310 2,583 3,023 2,904 2,631 2,561 4.56 3.95 5.53 6.03 4.99 3.90

Stock-in-trade 2,947 2,058 1,734 812 829 7,661 5.82 3.15 3.17 1.69 1.57 11.66

Tradedebts 1,851 890 571 153 188 2,624 3.66 1.36 1.05 0.32 0.36 4.00

Otherreceivables 3,583 5,300 6,042 3,174 3,930 9,290 7.08 8.11 11.06 6.59 7.45 14.14

Derivativefinancialinstruments 69 19 – – – – 0.14 0.03 – – – –

Investments 6,513 7,359 1,084 – – – 12.86 11.26 1.98 – – –

Cashandbankbalances 186 796 994 160 1,413 517 0.37 1.22 1.82 0.33 2.68 0.79

17,459 19,005 13,448 7,203 8,992 22,654 34.48 29.09 24.61 14.96 17.05 34.49

50,637 65,341 54,636 48,148 52,727 65,680 100.00 100.00 100.00 100.00 100.00 100.00

Horizontal AnalysisBalance Sheet

Vertical AnalysisBalance Sheet



Issued,subscribedandpaidupcapital 4,500 4,500 4,500 4,500 4,500 4,500 – – – – – –

Reserves 7,548 5,714 3,432 1,700 1,782 4,389 (25.61) (24.30) (39.94) (50.47) 4.85 146.23

Sharedepositmoney 200 200 – – – – – – (100.00) – – –

Revaluationreserve 2,476 11,942 11,964 11,884 14,491 15,023 – 382.31 0.18 (0.67) 21.93 3.67

14,724 22,356 19,896 18,084 20,773 23,911 (15.00) 51.83 (11.00) (9.11) 14.87 15.11

Non-Current LiabilitiesLongtermfinances 13,372 8,484 4,559 1,466 1,891 4,203 (17.41) (36.55) (46.26) (67.84) 28.97 122.29

Supplier’scredit-secured – – 1,796 1,488 1,100 1,100 – 100.00 (17.15) (26.08) – (100.00

Liabilitiesagainstassetssubjecttofinancelease 218 138 50 – – – 103.74 (36.70) (63.77) (100.00) – –

Payableagainstminingrights – – – – – (100.00) – – – – –

Longtermdeposits 44 48 46 47 48 45 (93.99) 9.09 (4.17) 2.49 1.96 (6.68)

Deferredliabilities 57 91 115 126 116 133 24.57 59.65 26.37 9.98 (8.45) 14.85

Deferredtaxation 5,574 10,967 10,923 9,933 10,187 7,972 12.04 96.75 (0.40) (9.07) 2.56 (21.74)

19,265 21,524 17,181 12,672 13,342 12,353 (12.84) 11.73 (20.18) (26.24) 5.28 (7.41

Current LiabilitiesCurrentportionoflongtermliabilities 4,009 6,335 4,878 3,132 901 1,072 199.40 58.02 (23.00) (35.79) (71.23) 18.96

Financesundermarkuparrangements-secured 4,702 4,644 5,814 4,736 4,637 15,152 (15.37) (1.23) 25.19 (18.54) (2.08) 226.72

PayabletoPrivatizationCommissionofPakistan 2,198 2,198 2,198 2,198 2,198 2,198 – – – (0.00) – –

Shorttermloanfromrelatedparty-secured – – – 3,000 3,000 2,200 – – – – – (26.67)

Tradeandotherpayables 4,458 3,121 3,225 3,989 7,555 8,345 78.96 (29.99) 3.33 23.68 89.42 10.46

Accruedfinancecost 650 677 366 337 320 449 (34.28) 4.15 (45.94) (8.04) (5.07) 40.65

Dividendpayable – 3,755 1,078 – – – – – – (100.00) – –

Provisionfortaxation 631 731 – – – – 396.85 15.85 (100.00) – – –

16,648 21,461 17,559 17,391 18,611 29,416 31.09 28.91 (18.18) (0.95) 7.01 58.06

50,637 65,341 54,636 48,148 52,727 65,680 (2.86) 29.04 (16.38) (11.88) 9.51 24.57


Dec31, Dec31, Dec31, Dec31, Dec31, Dec31, 2010vs 2011vs 2012vs 2013vs 2014vs 2015vs 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014Non-Current AssetsProperty,plantandequipment 21,916 37,937 37,290 37,114 39,909 39,194 2.96 73.10 (1.71) (0.47) 7.53 (1.79)

Assetssubjecttofinancelease 283 230 121 51 – – 91.22 (18.73) (47.39) (58.16) (100.00) –

Intangibles 183 161 149 144 125 94 (11.17) (12.02) (7.45) (3.08) (13.16) (24.81)

Goodwill 3,305 3,305 3,305 3,305 3,305 3,305 – – – 0.00 – –

Investments-relatedparty 2,930 130 262 295 361 405 (62.83) (95.56) 101.54 12.42 22.56 12.09

Loantosubsidiary 4,516 4,516 – – – – 105.65 – (100.00) – – –

Securitydeposits 45 57 61 36.22 35 28.55 164.71 26.67 7.02 (40.63) (4.65) (17.32)

33,178 46,336 41,188 40,945 43,735 43,027 (5.31) 39.66 (11.11) (0.59) 6.81 (1.62)

Current AssetsStoresandspareparts 2,310 2,583 3,023 2,904 2,631 2,561 22.87 11.82 17.03 (3.92) (9.41) (2.66)

Stock-in-trade 2,947 2,058 1,734 812 829 7,661 5.51 (30.17) (15.74) (53.19) 2.18 823.72

Tradedebts 1,851 890 571 153 188 2,624 29.71 (51.92) (35.84) (73.18) 22.62 1,297.23

otherreceivables 3,583 5,300 6,042 3,174 3,930 9,290 (47.42) 47.92 14.00 (47.47) 23.82 136.40

Derivative 69 19 – – – – 762.50 (72.46) (100.00) – – –

Investments 6,513 7,359 1,084 – – – 65.73 12.99 (85.27) (100.00) – –

Cashandbankbalances 186 796 994 160 1,413 517 (20.85) 327.96 24.87 (83.92) 784.32 (63.39)

17,459 19,005 13,448 7,203 8,992 22,654 2.18 8.86 (29.24) (46.44) 24.83 151.94

50,637 65,341 54,636 48,148 52,727 65,680 (2.86) 29.04 (16.38) (11.88) 9.51 24.57

16

ANNUAL REPORT 2015

17

Horizontal AnalysisProfit & Loss



Sales 18,248 16,701 8,136 7,428 14,248 21,920 9.23 (8.48) (51.28) (8.70) 91.81 53.85

CostofSales (9,051) (7,188) (6,221) (7,143) (12,264) (17,353) (7.61) (20.58) (13.45) 14.82 71.70 41.49

Gross Profit 9,197 9,513 1,915 286 1,984 4,568 33.10 3.44 (79.87) (85.09) 594.68 130.24

AdministrativeExpenses (780) (969) (1,165) (888) (731) (879) 27.87 24.23 20.23 (23.82) (17.67) 20.35

Selling&DistributionExpenses (994) (829) (299) (495) (686) (897) 10.69 (16.60) (63.93) 65.69 38.52 30.65

FinanceCost (3,589) (3,472) (2,610) (1,579) (1,626) (1,677) 13.61 (3.26) (24.83) (39.49) 2.94 3.15

OtherOperatingExpenses (387) (510) (218) (382) (1) (333) 58.61 31.78 (57.25) 75.08 (99.63) 23,190

OtherOperatingIncome 1,409 1,855 1,528 261 1,036 333 311.99 31.65 (17.63) (82.95) 297.47 (67.88)

Operating Profit 4,856 5,588 (849) (2,798) (25) 1,114 107.43 15.07 (115.19) 229.55 (99.12) (4,627.66)

Shareofprofit/(loss)ofassociatedco. (39) (18) – – – – 54.72 (53.85) (100.00) – – –

Re-measurementgain/(loss) (121) 741 (47) – – – (104.22) (712.40) (106.34) (100.00) – –

Profit before Taxation 4,696 6,311 (896) (2,798) (25) 1,114 (9.38) 34.39 (114.20) 212.26 (99.12) (4,627.66)

Taxation (1,464) (1,721) 656 973 (20) 1,345 229.73 17.55 (138.12) 48.29 (102.06) (6,810.44)

Profit after Taxation 3,232 4,590 (240) (1,825) (45) 2,460 (31.79) 42.02 (105.23) 660.45 (97.55) (5,607.61)

Vertical AnalysisProfit & Loss



Sales 18,248 16,701 8,136 7,428 14,248 21,920 100.00 100.00 100.00 100.00 100.00 100.00

CostofSales (9,051) (7,188) (6,221) (7,143) (12,264) (17,353) (49.60) (43.04) (76.46) (96.16) (86.08) (79.16)

Gross Profit 9,197 9,513 1,915 286 1,984 4,568 50.40 56.96 23.54 3.84 13.92 20.84

AdministrativeExpenses (780) (969) (1,165) (888) (731) (879) (4.27) (5.80) (14.32) (11.95) (5.13) (4.01)

Selling&DistributionExpenses (994) (829) (299) (495) (686) (897) (5.45) (4.96) (3.68) (6.67) (4.82) (4.09)

FinanceCost (3,589) (3,472) (2,610) (1,579) (1,626) (1,677) (19.67) (20.79) (32.08) (21.26) (11.41) (7.65)

OtherOperatingExpenses (387) (510) (218) (382) (1) (333) (2.12) (3.05) (2.68) (5.14) (0.01) (1.52)

OtherOperatingIncome 1,409 1,855 1,528 261 1,036 333 7.72 11.11 18.78 3.51 7.27 1.52

Operating Profit 4,856 5,588 (849) (2,798) (25) 1,114 26.61 33.46 (10.44) (37.67) (0.17) 5.08

Shareofprofit/(loss)ofassociatedco. (39) (18) – – – – (0.21) (0.11) – – – –

Re-measurementgain/(loss) (121) 741 (47) – – – (0.66) 4.44 (0.58) – – –

Profit before Taxation 4,696 6,311 (896) (2,798) (25) 1,114 25.73 37.79 (11.01) (37.67) (0.17) 5.08

Taxation (1,464) (1,721) 656 973 (20) 1,345 (8.02) (10.30) 8.06 13.10 (0.14) 6.14

Profit after Taxation 3,232 4,590 (240) (1,825) (45) 2,460 17.71 27.48 (2.95) (24.57) (0.31) 11.22

18

ANNUAL REPORT 2015

19

Directors’ Report To The Members

OnbehalfoftheBoardofDirectorsofPakarabFertilizersLimited,IpresentherewiththeAnnualReportofyourCompanyandtheauditedfinancialstatementsfortheyearendedDecember31,2015togetherwithauditors’reportthereonandabriefoverviewoffinancialandoperationalperformanceoftheCompany.

Company performance

Year2015wasabetteryearcomparedto2014fortheCompanyduetoRegasifiedLiquefiedNaturalGas(RLNG)suppliesinthecountry.ThefirstLNGcargoimportedinthecountrywaspurchasedbyPFL.RLNGsupplytoPFL’splantwasstartedonApril1,2015andcontinuedtotheendoftheyearresultinginoperationsof267 days in 2015 as compared to 42 daysin2014.TheProductionofCANandNPasapercentageofannualdesignedcapacitywas74%and101%respectively.

ManagementcontinueditsstrategyofdiversifyingtheCompany’srevenuestream.93,285MTofimportedDAPwassoldduringtheyear-2015whichalsocontributedsignificantlytoimprovingthefinancialpositionoftheCompany.

Asummaryoffinancialresultsfortheyear2015comparedwithyear2014isasunder: Rupeesinmillion

Year2015 Year2014

Sales 21,920 14,248GrossProfit 4,568 1,984OtherOperatingIncome 3331,036ProfitfromOperations 3,124 1,601FinanceCost (1,677)(1,626)Profit/(Loss)aftertax 2,460 (45)

Asummaryofconsolidatedfinancialresultsfortheyear2015comparedwithyear 2014 is as under : Rupeesinmillion Year2015Year2014

Sales 23,022 15,656GrossProfit 4,789 2,236FinanceCost (1,713) (1,684)OtherIncome 3331,040Profitaftertax 2,604 77

Appropriationsduringtheyearwereasfollows: Rupeesinmillion FairValue General Un-Appropriated Reserve Reserve Profit/ (accumulatedloss)

Balance as atDecember31,2014 66 2,098 (382)Othercomprehensiveincomefortheyear2015 34 – 113Profitfortheyear2015 – – 2,460 100 2,098 2,191

Performance of wholly owned subsidiary company-Reliance Sacks Limited (RSL)

RelianceSacksLimitedisawhollyownedsubsidiaryofPakarabFertilizersLimited(PFL).Itisprincipallyengagedinthemanufacturingandsaleofpolypropylenesacks,polypropyleneclothandliners.

Thiswasanotheryearwhenpricesof commodities remained volatile especiallythoselinkedwithoilproducts.Thepricesofthepolypropylenegranulesshoweddecreasingtrendandremainedintherangeof1,450US$/MTto960US$/MT.Thisdecreasingtrendwasdue to low oil prices in international market.AverageannualrequirementofPolypropyleneWoven(PPW)bagsofcorporate/organizedsectoris773millionwhereasannualproductioncapacityofPPWsuppliersis1,885million.However,RSLmainlyfocusedonfertilizersectorandselectedsugar,textileandothercompanies.

70%

60%

50%

40%

30%

20%

10%

0%

10%

-20%

-30%

50% 49%

64%

36%

-0.3%

16%14%

11%

-25%

-10%

2009 2010 2011 2012 2013 2014 2015

Profit to sale EBITDA margin

-3%

27%18%

28%

Net Profit & EBITDA Margin

Earning Per Share(Rupeesinmillion)

10.53

7.18

10.2

5.47

(4.15)

(0.53) (0.10)

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

FinancialresultsofRelianceSacksLimitedfortheyearendedDecember31,2015havebeensummarizedbelow: Rupeesinmillion

Description Yearended Yearended December31, December31, 2015 2014

SalesexcludingGST 1,492 1,584Costofsales (1,271) (1,330)Grossprofit 221 253Adminandsellingexpenses (27) (25)FinancialCharges (36) (58)OtherExpenses (15) (12)Otherincome - 5Profitbeforetaxation 143 163Taxation 2 (41)Profitaftertaxation 145 122

20

ANNUAL REPORT 2015

21


ThesalesintermsofRupeesremainedlowduetodecreaseinthePolypropyleneGranules(PPG)prices,howeverintermsofkgsitincreasedfrom5.084millionKgsto5.268millionKgs.DecreaseingrossprofitismainlyattributedtohigherelectricitycostwhichincreasedbyRs.25million.Financialchargesdecreasedduetopaymentoflongtermfinanceandreductionindiscountrate.Taxationchargeadjustedwithreversalofdeferredtaxprovisionandclubbingofassessmentwithholdingcompanyasasinglefiscalunit.

Manufacturing OverviewPlant Operation with RLNG

Aftersustainingaperiodofmorethanthreeyearsoflowcapacityutilizationandproductivity,PakarabfertilizersbecamethefirstfertilizercompanyinPakistantobeabletostartoperationsonRe-gasifiedLiquidNaturalGas(RLNG).PakarabtakesprideinworkingwiththeGOPinimportofthefirstRLNGshipinMarch2015andresumingitsmanufacturingoperationswitheffect from 1stApril,2015.In2015PFLconsumedthreeLNGships.TheRLNG,duetoeconomicreasons,wasusedinproductionofNPandCANfertilizersalone.

TheplantoperationsweremaintainedsmoothlywithrestrainedcostsandmanninginviewofthehighcostofRLNGascomparedtodomesticgas.

NitrateFertilizersproductionremainedunderpressureduetodamagedNitricAcidlineCrotorwhich,beingveryoldandun-availabilityofspares,hadlongtermfailure.ItisundermaintenanceandwillbeavailabletousagainatendofMarchforfurtheroperations.

PlantsitewitnessedlargeoperationsofproducthandlingduetolowCANfertilizersales/shipments.Tocopewiththissituation,exportofCANfertilizerisbeingexplored.Toenableexports,projectsforalignmentofCANproductqualityhavebeentakenup.CANGranulationprojectisalsounderconsiderationforthispurpose.

Energy Conservation Projects at Pakarab

Sincerawmaterialpriceisveryhighascomparedtodomesticgas,thereisadireneedtotakeupconservationstepstominimizeoperationalcosts.Severalshorttermenergyandwaterconservationprojectswereinitiatedandcompleted.

Completed projects

• UseofsteamcoilsinCNmelttankat NP plant instead of live steam to conservesteam.

• Recoveryofcondensate/heatfromairheater40-2110atNPPlant-Steamconservation

• Partial conversion of vacuum pumps installedatNPplantfromDMWtoRW-Waterconservation

• FueloptimizationatFurnaceofAmmoniaplant-Gasoptimization

• Ammonia Process condensate recoveryproject-Steamconservation

• PGRUexchangerE-102tubebundlereplacement-Ammoniaproductlossreduction

Byimplementationofaboveprojects,therewillbeanetsavingofPKR75millionperannumwithin2016alone.Furthermore,followinglonger/mediumtermCAPEXprojectsarebeingtakenupfor 2016:

a. FeedgaspreheatcoilinAmmoniaPrimary reformer convection section

b. LTStrimcoolerinstallation/upgradeexisting104-Cwithimprovedsizeandmetallurgy.

Raw water quality at site

Overthepastfewyears,aregulardepletioninsubsoilwaterqualitywasexperienced.Tocopewiththisissue,new raw water well was installed at an appropriatelocation.Theinvestmenthasalreadypaidbackinareasonabletimeastheconductivityinrawwatertankdroppedfrom950uS/cmto610uS/

cmonaveragebasiswhichwillreduceoperatingcostofPKR27.34millionperannum.

Manufacturing Overview-Reliance Sacks Limited

RelianceSacksLimitedproduced5.332millionKgs(2014:5.194millionKgs)intapelinesectionandachieved92.10%(2014:89.71%)ofthestandardcapacity.Thecompanyproduced53.28millionbags(2014:55.27millionbags)duringtheyearwhichisinlinewithexpectationsanditvariesaccordingtosizeandweightofbags.Further,thecompanyproduced1.788millionkgsofliners(2014:1.483millionkgs)duringtheyearwhichis87.07%ofthecapacity(2014:90.26%ofcapacity).Duringtheyear,anotherlinermachinewasaddedwithcapacityof1,000kgsperday.

Employee Engagement Activities

TheannualTownHallmeetingwasheldatPakarabFertilizersLimitedandallthe

ManagementEmployeesatPFLwereinvited.ThemainobjectiveoftheTownHallmeetingwastoenabletheseniorleadershiptokeepyoungengineersinformed,engagedandinsyncwithbusinesschallengesandgoals.

Social/CSR Activities

TheCompany and employees donated fundstohelpthefloodvictims.ThisdonationwashandedovertoPakistanArmyforfinaldispersal.AfterthefloodsinandaroundMultan,afreemedicalcampwassetupatShujaAbad,HeadMohammadWallaandMahniSiyalareasnearMultan.About550patientsweretreatedinthesecamps.

Hunar Foundation School

Aspartofitsefforttohelpcommunity,PFLengagedwithHunarFoundation,KarachitobuildatechnicalschoolforlocalpopulationwithinPFLpremises.NecessaryapprovalshavebeenobtainedforthisschoolanditisgoingtobefunctionalfromJuly2016.TheschoolcharterandsyllabuswillbecertifiedbyCity&GuildUK/TEVTA.

Blood Donation Camp

A blooddonationcampwasarrangedwiththesupportofFatimidfoundationandPFLmedicalCentre.Morethan70Employeesdonatedbloodforthechildrensufferingfromthalassemiainthiscamp.

Free Medical Camps

Twofreemedicalcamps(Dental&EyesCheckup)werearrangedforemployeesandtheirfamiliesduringsafetyweek.Employeesandtheirfamilies’participationinthesefreecampswasveryencouraging.Approximately70patientswerecheckedbyDentalsurgeonand67patientswerecheckedbyaneyespecialist.Besidethesefreemedicalcamps,medicalcenteralsoarrangedmanyawarenesscampaigns relatedtohealthofemployees.

600,000

500,000

400,000

300,000

200,000

100,000

0

NP CAN Urea TotalActual

265,3

49

275,5

69

287,9

54

305,1

45

553,3

03

580,7

14

0 0

Budgeted

300

250

200

150

100

50

0

258

00

NP CAN UreaPlanned Actual

266 259265

Production Statistics (MeT)-2015

No of Operating Days-2015

22

ANNUAL REPORT 2015

23


LahoreApril08,2016

Arif HabibChairman

Health Safety and Environment Achievements – 2015.

Completion of 15.0 million Safe Man Hours.

PFLhascompleted15.0millioncombinedsafemanhoursinDecember2015.ThisisthehighestlandmarkeverachievedinPFLhistory.PFLdistributedsafetyawardsforcompletionof14.0millioncombinedsafehoursforallregularandcontractoremployees.

Safety Week Celebration

PFLorganized1steversafetyweekofitshistoryinOctober2015.Theobjectiveofthesafetyweekwastoensureemployees’engagementandownershipinCompanyHealth,safetyandenvironmentprogram.Safetyawareness of employees was raised throughdifferentinteractingsessionslikePPEsawareness,housekeepingdrive,SCBAdonning,SafetyCommitmentBoard,MSDS,PSMquiz,SafetyGalaetc.Responseofthesafetyweekwasveryencouragingastherewerenoinjuriesafterthatin2015.RepresentativesfromCorporateHSEandsistercompaniesofFatimagroupalsoparticipatedinsafetyweekandappraisedtheevent.

IFA Protect and sustainable product Stewardship Award

PFLhasreceivedprotectandsustainableproductstewardshipawardbyIFAbyscoring74%marks.It’samatterofgreathonorthatPFListhe1st ever company underFatimagrouptoachieveIFAcertificationinASIA.IFAauditwasconductedbyM/SSGS.PFLarranged1st,2ndpartyauditsbeforefinalaudit.

Green Office Certification

PFLhassuccessfullyachievedgreenofficecertificationbyscoring75%scoreinopeningaudit.ThisisthehighestscoreachievedbyanycompanyinopeningauditinPakistan.PFLselectedthreeKPIs(Paper,ElectricityandMixedwastereduction)andreductiontargetof5%wassetfor2015.SuccessfulauditwasconductedbyWWFPakistaninDecember2015.

British Safety Council Award

PFLreceivedtheBritishsafetycouncilawardin2015again.Thisisthe5th consecutiveBritishsafetycouncilawardwonbyPFLwhichdepictsdedication,devotionandcommitmentofPFLtopmanagementandstafffornourishinghealth,safetyandenvironmentculture.PFLachieved56marksoutof60.

GO Live - SMIS Modules

FivemodulesofSafetymanagementinformationsystem(SMIS)includingManagementsafetyaudit,weeklyfiredrill,quarterlyemergencydrill,SOCMOMsandIncidentinvestigationand recommendation module were launchedatsite.Trainingsessionswerearrangedforallemployeesbeforelaunch.

IFA Hard Hat campaign

PFLparticipatedinhardhatcampaignorganizedbyinternationalfertilizerassociation(IFA)inApril2015.Awarenessdrivewasinitiatedatsite.HardhatsnapwasalsopastedonIFAsite.

Code of Corporate Governance

TheBoardandmanagementarecommittedtoensurethattherequirementsoftheCodeofCorporateGovernancearefullymet.Thoughitisnotapplicablebeinganon-listedcompanybuttheCompanyisvoluntarilycomplyingtheCode.TheCompanyhasadoptedgoodCorporateGovernancepracticeswithanaimtoenhancetheaccuracy,comprehensivenessandtransparencyoffinancialandnon-financialinformation.Pursuanttoandinvoluntarilycompliancewithclause(xvi)oftheCodeofCorporateGovernance,theDirectorsarepleasedtoreportthat:

a) Thefinancialstatements,preparedbythemanagementoftheCompany,presentitsstateofaffairsfairly,theresultofitsoperations,cashflowsandchangesinequity;

b) ProperbooksofaccountoftheCompanyhavebeenmaintained;

c) Appropriateaccountingpolicieshavebeenconsistentlyappliedinpreparationoffinancialstatementsandaccountingestimatesarebasedonreasonableandprudentjudgment;

d) InternationalFinancialReportingStandards,asapplicableinPakistan,havebeenfollowedinthepreparationoffinancialstatements;

e) Thesystemofinternalcontrolissoundindesignandhasbeeneffectively implemented and monitored;and

f) TherearenosignificantdoubtsupontheCompany’sabilitytocontinueasagoingconcern.

Board and Committees’ Meetings and Attendance

Duringtheyearunderreview,sixmeetingsoftheBoardofDirectorsandfourmeetingsoftheAuditCommitteewereheldfromJanuary01,2015toDecember31,2015.TheattendanceoftheBoardandCommitteememberswasas follows:

NameofDirector Board Audit Meetings Committee Meetings

Mr.ArifHabib 5 N/AMr.FawadAhmedMukhtar 6 N/AMr.FazalAhmedSheikh 5 3Mr.FaisalAhmedMukhtar 1 N/AMr.RehmanNaseem 5 3Mr.AbdusSamad 3 N/AMr.MuhammadKashifHabib 4 4Mr.NasimBeg 3 4

TheleaveofabsencewasgrantedtothemembersnotattendingtheBoardandCommitteemeetings.

Pattern of Shareholding

ThedetailedpatternoftheshareholdingandcategoriesofshareholdersoftheCompanyasatDecember31,2015havebeenAnnexedherewith.

Trading in Shares of the Company by Directors and Executives

ThesharesoftheCompanyarenotlistedonanystockexchangesotheDirectors,CEO,CFO,CompanySecretaryandtheirspousesandminorchildrendidnotcarryoutanytradeinthesharesoftheCompany.

Financial Highlights

KeyoperatingandfinancialdataofpreviousyearshasbeenAnnexedherewith.

Post Balance Sheet Events

Therehavebeennomaterialpostbalancesheeteventsthatwouldrequiredisclosureoradjustmenttothesefinancialstatements.

Contribution to National Exchequer and Economy

TheCompany’scontributiontotheNationalExchequerbywayoftaxes,levies,excisedutyandsalestaxamountstoRs.3,144millionasagainstRs.3,150millionlastyear.

Statement as to the Value of Investments of Provident and Gratuity Funds

ThefundedretirementbenefitsoftheemployeesoftheCompanyareauditedatregularintervalsandareadequatelycoveredbyappropriateinvestments.ThevalueoftheinvestmentsofthetwoprovidentfundsandgratuityfundaggregatedtoRs.400.696Millions.Accordingtoactuarialvaluation,fairvalueoftheassetsofthefundeddefinedbenefitgratuityplanforbothmanagementandnon-managementstaffisRs.136.175Millionason31st December2015.

Audit Committee

TheAuditCommitteeoftheBoardcontinued to perform its duties and responsibilitieseffectivelyasperitstermsofreferencedulyapprovedbytheBoard.Thecommitteecompositionanditstermsofreferencehavealsobeenattachedtothisreport.

Code of Conduct

AspertheCorporateGovernanceguidelines,theCompanyhasprepareda Code of Conduct and communicated throughouttheCompanyapartfromplacingitontheCompany’swebsite.

Auditors

M/sA.F.Ferguson&CompanyCharteredAccountantsLahore,retiringauditorsoftheCompany,beingeligibleofferthemselvesforre-appointment.TheBoardAuditCommitteeandtheBoardofDirectorshaverecommendedtheirre-appointmentbytheshareholdersatthe43rdAnnualGeneralMeeting,asauditorsoftheCompanyfortheyearendingDecember31,2016atafeetobemutuallyagreed.

Future Outlook

GiventheGovernment’scommitmenttoimportLNG,PFLexpectstobeabletocontinueitsoperationsonRLNGfortheforeseeablefuture.LNGpricesareexpectedtoreducein2016whichwilltranslatedirectlytobottomlineoftheCompany.ImprovedperformancecanbeexpectedgiventhedeclineinpricesintheinternationalmarketforLNG.

Acknowledgements

TheBoardplacesonrecorditsgratitudeforthehardworkanddedicationofeveryemployeeoftheCompany.TheBoardalsoappreciatesandacknowledgestheassistance,guidanceandcooperationofallstakeholdersincludingtheGovernmentofPakistan,financialinstitutions,commercialbanks,businessassociates,customersandallotherswhoseeffortsandcontributionsstrengthenedtheCompany.

ForandonbehalfofBoard

24

ANNUAL REPORT 2015

25

Statement of Compliancewith the code of corporate Governance for the year ended December 31, 2015

Attachment to The Directors’ Reportto all members of the Company

ThisstatementisbeingpresentedtovoluntarilycomplywiththeCodeofCorporateGovernance(CCG)forthepurposeofestablishingaframeworkofgoodgovernance,wherebyalistedcompanyismanagedincompliancewiththebestpracticesofcorporategovernance.

TheCompanyhasappliedtheprinciplescontainedintheCCGinthefollowingmanner:

1. TheCompanyencouragestherepresentationofindependentnon-executive directors and directors representingminorityinterestsonitsboardofdirectors.CurrentlythereisnoindependentdirectorontheBoardastheCompanyisvoluntarilycomplyingwiththeCCG.TheCompanyhasalsoconductedannualevaluationoftheBoard’sownperformance.Atpresenttheboardincludes:

Category Names

ExecutiveDirectors 1.MrFawadAhmedMukhtar 2.MrFazalAhmedSheikhNon-ExecutiveDirectors 1.MrArifHabib 2.MrNasimBeg 3.MrFaisalAhmedMukhtar 4.RehmanNaseem 5.MrMuhammadKashifHabib 6.MrAbdusSamad

2. Thedirectorshaveconfirmedthatnoneofthemisservingasadirectoronmorethansevenlistedcompanies.

3. AlltheresidentdirectorsoftheCompanyareregisteredastaxpayersandnoneofthemhasdefaultedinpaymentofanyloantoabankingCompany,aDFIoranNBFIor,beingamemberofastockexchange,hasbeendeclaredasadefaulterbythatstockexchange.

4. NocasualvacancyoccurredontheBoardduringtheyear.

5. TheCompanyhasprepareda“CodeofConduct”andhasensuredthatappropriatestepshavebeentakentodisseminateitthroughouttheCompanyalongwithitssupportingpoliciesandprocedures.

Place:LahoreDate:April08,2016

Fawad Ahmed MukhtarChiefExecutiveOfficer

DearSir/Madam,

ABSTRACT OF THE TERMS OF APPOINTMENT UNDER SECTION 218 OF THE COMPANIES ORDINANCE, 1984

Inpursuanceofsection218oftheCompaniesOrdinance,1984,thisistoinformyouthattheBoardofDirectorsoftheCompanyonDecember31,2015hasreappointedMr.FawadAhmedMukhtarasChiefExecutiveOfficeroftheCompanyforthenextthreeyearscommencingfromJanuary01,2016toDecember31,2018withoutanyremuneration.TheChiefExecutiveOfficershallbeentitledtoalltherightsandprivilegesandsubjecttoalltheliabilitiesoftheofficeoftheChiefExecutive.TheChiefExecutiveshallcarryonthedaytodaybusinessandaffairsoftheCompanyinconsultationwiththeBoardofDirectorsinaccordancewiththeprovisionsoftheMemorandumandArticlesofAssociationoftheCompany.

MEMORANDUM UNDER SECTION 218 OF THE COMPANIES ORDINANCE, 1984

Mr.FawadAhmedMukhtarisconcerned/interestedinhisappointmenttotheextentmentionedaboveanduptotheextentofhisshareholding/directorshipinPakarabFertilizersLimited.Nootherdirectorsareconcerned/interestedinthisrespect.

6. Theboardhasdevelopedavision/missionstatement,overallcorporatestrategyandsignificantpoliciesoftheCompany.A complete record of particulars of significantpoliciesalongwiththedatesonwhichtheywereapprovedoramendedhasbeenmaintained.

7. Allthepowersoftheboardhavebeendulyexercisedanddecisionsonmaterialtransactions,includingappointment and determination of remuneration and terms and conditions of employmentoftheCEO,otherexecutiveandnon-executivedirectors,havebeentakenbytheboard.

8. ThemeetingsoftheboardwerepresidedoverbytheChairmanandtheboardmetatleastonceineveryquarter.Writtennoticesoftheboardmeetings,alongwithagendaandworkingpapers,were circulated at least seven days beforethemeetingsexceptinthecaseofanemergencymeetingheldonJune24,2015inwhichcasethenoticeperiodisreduced.Theminutesofthemeetingswere appropriately recorded and circulated.

9. Theboardarrangedin-houseonetrainingprogramforitsdirectorsduringtheyeartoacquaintthemwiththeCode.

10. TheBoardhasapprovedappointmentofChiefFinancialOfficer(CFO),CompanySecretary and Head of Internal Audit includingtheirremunerationandtermsandconditionsofemployement.ThereisnonewappointmentofCFO,CompanySecretary and Head of Internal Audit duringtheyear.

11. Thedirectors’reportforthisyearhasbeenpreparedincompliancewiththerequirementsoftheCCGandfullydescribesthesalientmattersrequiredtobedisclosed.

12. ThefinancialstatementsoftheCompanyweredulyendorsedbyCEOandCFObeforeapprovaloftheboard.

13. Thedirectors,CEOandexecutivesdonotholdanyinterestinthesharesoftheCompanyotherthanthatdisclosedinthepatternofshareholding.

14. TheCompanyhascompliedwithallthecorporateandfinancialreportingrequirementsoftheCCG.

15. TheboardhasformedanAuditCommittee.Itcomprisesfourmembers,ofwhomthreearenon-executivedirectorsandthechairmanofthecommitteeisanon-executivedirector.

16. ThemeetingsoftheauditcommitteewereheldatleastonceeveryquarterpriortoapprovalofinterimandfinalresultsoftheCompanyandasrequiredbytheCCG.Thetermsofreferenceofthecommitteehavebeenformedandadvisedtothecommitteeforcompliance.

17. TheboardhasformedanHRandRemunerationCommittee.Itcomprisesfourmembers,allofwhomarenon-executivedirectorsandthechairmanofthecommitteeisanon-executivedirector.

18. TheboardhassetupaneffectiveinternalauditfunctionwhichisconsideredsuitablyqualifiedandexperiencedforthepurposeandareconversantwiththepoliciesandproceduresoftheCompany.

19. ThestatutoryauditorsoftheCompanyhaveconfirmedthattheyhavebeengivenasatisfactoryratingunderthequalitycontrolreviewprogramoftheICAP,thattheyoranyofthepartnersofthefirm,theirspousesandminorchildrendonotholdsharesoftheCompanyandthatthefirmandallitspartnersareincompliancewithInternationalFederationofAccountants(IFAC)guidelinesoncodeofethicsasadoptedbytheICAP.

20. ThestatutoryauditorsorthepersonsassociatedwiththemhavenotbeenappointedtoprovideotherservicesexceptinaccordancewiththelistingregulationsandtheauditorshaveconfirmedthattheyhaveobservedIFACguidelinesinthisregard.

21. WeconfirmthatallothermaterialprinciplesenshrinedintheCCGhavebeencompliedwith.

26

ANNUAL REPORT 2015

27

FINANCIALSTATEMENTSOF

fortheyearendedDecember31,2015

Thepageisleftintentionallyblank

28

ANNUAL REPORT 2015

Review Report To The MembersOn Statement of Compliance with Best Practices of Code of Corporate Governance

Wehave reviewed the StatementofCompliancewith thebestpracticescontained in theCodeofCorporateGovernancepreparedbytheBoardofDirectorsofPakarabFertilizersLimited(the‘company’)tovoluntarilycomplywiththeListingRegulationNo.35oftheKarachiStockExchangeLimited,wherethecompanywaspreviouslylisted.

The responsibility forcompliancewith theCodeofCorporateGovernance (the ‘Code’) is thatof theBoardofDirectorsofthecompany.Ourresponsibilityistoreview,totheextentwheresuchcompliancecanbeobjectivelyverified,whethertheStatementofCompliancereflectsthestatusofthecompany’scompliancewiththeprovisionsof theCodeofCorporateGovernanceand report if itdoesnot.A review is limitedprimarily to inquiriesof thecompanypersonnelandreviewofvariousdocumentspreparedbythecompanytocomplywiththeCode.

Aspartofourauditoffinancial statementsweare requiredtoobtainanunderstandingof theaccountingandinternalcontrolsystemssufficienttoplantheauditanddevelopaneffectiveauditapproach.WearenotrequiredtoconsiderwhethertheBoard’sstatementoninternalcontrolcoversallrisksandcontrols,ortoformanopinionontheeffectivenessofsuchinternalcontrols,thecompany’scorporategovernanceproceduresandrisks.

TheCoderequiresthecompanytoplacebeforetheBoardofDirectorsfortheirconsiderationandapprovalrelatedpartytransactionsdistinguishingbetweentransactionscarriedoutontermsequivalenttothosethatprevailinarm’slengthtransactionsandtransactionswhicharenotexecutedatarm’s lengthpricerecordingproper justificationforusingsuchalternatepricingmechanism.Further,allsuchtransactionsarealsorequiredtobeseparatelyplacedbeforetheauditcommittee.WeareonlyrequiredandhaveensuredcomplianceofrequirementtotheextentofapprovalofrelatedpartytransactionsbytheBoardofDirectorsandplacementofsuchtransactionsbeforetheauditcommittee.Wehavenotcarriedoutanyprocedurestodeterminewhethertherelatedpartytransactionswereundertakenatarm’slengthpriceornot.

Based on our review, nothing has come to our attention which causes us to believe that the Statement ofCompliance does not appropriately reflect the company’s compliance, in all material respects, with the bestpracticescontained in theCodeofCorporateGovernanceasapplicable to thecompany for theyearendedDecember31,2015.

Further,wehighlighttheinstanceofnon-compliancewiththerequirementoftheCodeasreflectedintheparagraph1ofthestatementofcompliancewhichstatesthat:

1. ThecompanydoesnothaveanindependentdirectorontheBoardasit isvoluntarilycomplyingwiththeCode;and

2. Thecompanyis intheprocessofannualevaluationoftheBoard’sownperformanceasthesamehasnotbeenconductedduringtheyear.

A.F.Ferguson&Co.CharteredAccountants

Lahore,April08,2016

EngagementPartner:MuhammadMasood

Auditors’ Report to the Members

WehaveauditedtheannexedbalancesheetofPakarabFertilizersLimited(Company)asatDecember31,2015,andtherelatedprofitandlossaccount,statementofcomprehensiveincome,cashflowstatementandstatementofchanges inequity togetherwith thenotes formingpart thereof, for theyear thenendedandwe state thatwehaveobtainedall the informationandexplanationswhich, to thebestofour knowledgeandbelief,werenecessaryofthepurposesofouraudit.

It istheresponsibilityofthecompany’smanagementtoestablishandmaintainasystemof internalcontrolandprepareandpresenttheabovesaidstatementsinconformitywiththeapprovedaccountingstandardsandtherequirementsoftheCompaniesOrdinance.1984.

Ourresponsibilityistoexpressanopiniononthestatementsbasedonouraudit.

Weconductedouraudit inaccordancewith theauditing standardsasapplicable inPakistan These standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the above saidstatementarefreeofanymaterialmisstatement.

An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the abovesaid statements. An audit also includes assessing the accounting policies and significant estimates made bymanagement,aswellas,evaluatingtheoverallpresentationoftheabovesaidstatements.Webelievethatourauditprovidesareasonablebasisforouropinionand,afterdueverification,wereportthat:

(a) Inouropinionproperbooksofaccounthavebeenkeptbythecompanyasrequiredbythecompaniesordinance,1984.

(b) In our opinion:

(i) The balance sheet and profit and loss account togetherwith the notes thereon have been drawn up inconformitywiththecompaniesordinance,1984,andareinagreementwiththebooksofaccountandarefurtherinaccordancewithaccountingpoliciesconsistentlyapplied;

(ii) Theexpenditureincurredduringtheyearwasforthepurposeofthecompany’sbusiness;and

(iii) Thebusinessconducted,investmentsmadeandtheexpenditureincurredduringtheyearwereinaccordancewiththeobjectsofthecompany;

(c) Inouropinionandtothebestofourinformationandaccordingtotheexplanationsgiventous,thebalancesheet,profitandlossaccount,statementofcomprehensiveincome,cashflowstatementandstatementofchangesinequitytogetherwiththenotesformingpartthereofconformwithapprovedaccountingstandardsasapplicableinPakistan,andgivetheinformationrequiredbytheCompaniesOrdinance,1984,inthemannersorequiredandrespectivelygiveatrueandfairviewofthestateofthecompany’saffairsasatDecember31,2015andoftheloss,totalcomprehensiveloss,itscashflowsandchangesinequityfortheyearthenended;and

(d) Inouropinion,noZakatwasdeductibleatsourceundertheZakatandUshrOrdinance,1980(XVIIIof1980)

A.F.Ferguson&Co.

CharteredAccountants

Lahore,April08,2016


30

ANNUAL REPORT 2015

31

Note 2015 2014 (Rupeesinthousand)

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES Authorisedsharecapital 1,000,000,000(2014:1,000,000,000) ordinarysharesofRs10each 10,000,000 10,000,000

Issued,subscribedandpaidupsharecapital 450,000,000(2014:450,000,000) ordinarysharesofRs10each 5 4,500,000 4,500,000Reserves 6 4,388,510 1,782,308

8,888,510 6,282,308

SURPLUS ON REVALUATION OF OPERATING FIXED ASSETS 7 15,022,831 14,491,103 NON-CURRENT LIABILITIES Longtermfinances-secured 8 1,970,139 1,064,882Longtermloansfromrelatedparties-unsecured 9 2,232,952 825,968Importbillpayable-secured 10 – 1,100,000Longtermdeposits 11 44,860 48,070Deferredliabilities 12 132,980 115,789Deferredtaxation 13 7,972,085 10,187,240

12,353,016 13,341,949CURRENT LIABILITIESCurrentportionoflongtermloans 8 1,072,022 901,189Shorttermborrowingfromrelatedparty-secured 14 2,200,000 3,000,000Shorttermborrowings-secured 15 15,151,614 4,637,446PayabletoPrivatizationCommissionofPakistan 16 2,197,901 2,197,901Tradeandotherpayables 17 8,345,123 7,555,283Accruedfinancecost 18 449,423 319,531 29,416,083 18,611,350 CONTINGENCIES AND COMMITMENTS 19 65,680,440 52,726,710

Theannexednotes1to46formanintegralpartofthesefinancialstatements.

Balance Sheetas at December 31, 2015

ChiefExecutive Director


ASSETS

NON-CURRENT ASSETS

Property,plantandequipment 20 39,194,084 39,908,940Assetssubjecttofinancelease 21 – –Intangibleassets 22 94,289 125,399Goodwill 23 3,305,163 3,305,163Longterminvestments 24 404,630 360,998Securitydeposits 28,554 34,534

43,026,720 43,735,034

CURRENT ASSETS

Storesandspareparts 25 2,560,963 2,631,027Stock-in-trade 26 7,660,745 829,332Tradedebts 27 2,624,200 187,814Advances,deposits,prepaymentsandotherreceivables 28 9,290,354 3,930,048Cashandbankbalances 29 517,458 1,413,455 22,653,720 8,991,676

65,680,440 52,726,710

32

ANNUAL REPORT 2015

33

Profit and Loss Accountfor the year ended December 31, 2015

Statement of Comprehensive Incomefor the year ended December 31, 2015

ChiefExecutive Director ChiefExecutive Director


Sales 30 21,920,495 14,248,110

Costofsales 31 (17,352,799) (12,264,244)

Gross profit 4,567,696 1,983,866

Administrativeexpenses 32 (879,397) (730,690)

Sellinganddistributionexpenses 33 (896,542) (686,240)

2,791,757 566,936

Financecost 34 (1,676,988) (1,625,843)

Otherexpenses 35 (333,189) (1,431)

781,580 (1,060,338)

Otherincome 36 332,683 1,035,727

Profit/(loss) before taxation 1,114,263 (24,611)

Taxation 37 1,345,449 (20,050)

Profit/(loss) for the year 2,459,712 (44,661)



Profit/(loss)fortheyear 2,459,712 (44,661)

Other comprehensive income:

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss:

Surplusonremeasurementoffairvalueofavailable-for-saleinvestment 38,943 62,040

Deferredtaxchargerelatingtoremeasurementofavailable-for-saleinvestmenttofairvalue (5,405) (16,285)

33,538 45,755

Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss:

Surplusonrevaluationofoperatingfixedassetsrealisedthroughincrementaldepreciationchargedonrelatedassetsfortheyear 115,832 82,646

Remeasurementofpostretirementbenefitobligation (2,880) (1,290)

112,952 81,356

Other comprehensive income - net of tax 146,490 127,111

Total comprehensive income for the year - net of tax 2,606,202 82,450


34

ANNUAL REPORT 2015

35

Statement of Changes In Equityfor the year ended December 31, 2015

(Rupees in thousand)

Capital Revenue reserves reserve

(Accumulated loss) / un Share Fair value General appropriated capital reserve reserve profit Total

Balance as on January 1, 2014 4,500,000 20,284 2,098,313 (418,739) 6,199,858

Lossfortheyear – – – (44,661) (44,661)

Othercomprehensiveincomefortheyear-netoftax – 45,755 – 81,356 127,111

Total comprehensive income for the year – 45,755 – 36,695 82,450

Balance as on December 31, 2014 4,500,000 66,039 2,098,313 (382,044) 6,282,308

Profitfortheyear – – – 2,459,712 2,459,712

Othercomprehensiveincomefortheyear-netoftax – 33,538 – 112,952 146,490

Total comprehensive income for the year – 33,538 – 2,572,664 2,606,202

Balance as on December 31, 2015 4,500,000 99,577 2,098,313 2,190,620 8,888,510 Theannexednotes1to46formanintegralpartofthesefinancialstatements.


Cash Flow Statementfor the year ended December 31, 2015


Cash flows from operating activities

Cash(usedin)/generatedfromoperations 38 (8,122,881) 4,920,789Financecostpaid (1,546,614) (1,510,738)Taxespaid (892,265) (549,182)Retirementbenefitspaid (43,661) (49,587)Securitydeposits-net 2,770 (14,600)

Net cash (outflow)/inflow from operating activities (10,602,651) 2,796,682

Cash flows from investing activities

Purchaseofproperty,plantandequipment (38,600) (42,476)Purchaseofintangibleassets (607) (10,654)Saleproceedsofproperty,plantandequipmentdisposed 26,602 373,027Investmentsmade – (227)Profitonbankdepositsreceived 62,299 24,857

Net cash inflow from investing activities 49,694 344,527

Cash flows from financing activities

Repaymentofredeemablecapital – (1,625,000)Proceedsfromlongtermloansacquired 2,000,000 500,000Proceedsfromlongtermloansacquiredfromrelatedparties 2,003,707 825,968Proceedsfromshorttermborrowingacquiredfromrelatedparty 500,000 –Repaymentoflongtermloans (901,192) (1,468,206)Repaymentoflongtermloansfromrelatedparties (596,723) –Paymentofimportbillpayable (2,539,800) –Paymentoffinanceleaseliabilities – (21,602)Repaymentofshorttermborrowingfromrelatedparty (1,300,000) –Paymentofinitialtransactioncostonlongtermloanacquired (23,200) –

Net cash outflow from financing activities (857,208) (1,788,840)

Net (decrease)/increase in cash and cash equivalents (11,410,165) 1,352,369

Cash and cash equivalents at the beginning of the year (3,223,991) (4,576,360)Cash and cash equivalents at the end of the year 39 (14,634,156) (3,223,991)


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Notesto and forming part of the Financial Statements for the year ended December 31, 2015

1. The company and its activities

PakarabFertilizersLimited(‘company’)wasincorporatedasaprivatelimitedcompanyinPakistanundertheCompaniesAct,1913,(nowCompaniesOrdinance,1984).Thecompany’sstatuschangedtoanon-listedpubliccompanyfromJune7,2007.Thecompany’sTermFinanceCertificateswerelistedattheKarachiStockExchangeLimited(nowmergedasPakistanStockExchangeLimited)duringtheperiodfromMarch2008toMarch2013.Thereafterthecompanyisanon-listedpubliccompany.ItisprincipallyengagedinthemanufacturingandsaleofchemicalfertilizersandgenerationandsaleofCertifiedEmissionReductions(‘CERs’).TheaddressoftheregisteredofficeofthecompanyisE-110,Khayaban-e-Jinnah,LahoreCanttwhileitsmanufacturingfacilityislocatedinMultan.

Thesefinancialstatementsaretheseparatefinancialstatementsofthecompany.Consolidatedfinancialstatementsarepreparedseparately.

2. Basis of preparation

2.1 These financial statements havebeenprepared in accordancewith approvedaccounting standards as applicable in Pakistan.Approvedaccounting standards compriseof such International Financial Reporting Standards (‘IFRS’) issuedby the InternationalAccountingStandardsBoard(‘IASB’)andIslamicFinancialAccountingStandards(‘IFAS’)issuedbyInstituteofCharteredAccountantsofPakistanasarenotifiedundertheCompaniesOrdinance,1984,provisionsofanddirectivesissuedundertheCompaniesOrdinance,1984.WherevertherequirementsoftheCompaniesOrdinance,1984ordirectivesissuedbySecuritiesandExchangeCommissionofPakistan(‘SECP’)differwiththerequirementsofIFRSorIFAS,therequirementsoftheCompaniesOrdinance,1984ortherequirementsofthesaiddirectivesprevail.

2.2 Duringtheyear,SECPhasmadeamendmentsintheFifthScheduletotheCompaniesOrdinance,1984,throughSRO928(I)/2015datedSeptember10,2015.Theseamendmentsrelatetothechangesmadeintheclassificationofnon-listedcompaniesforthepurposeofpreparationoftheirfinancialstatements.Undertheseamendments,thecompanyfallsunderthedefinitionofa‘LargeSizedCompany’.Further,throughSRO929(I)/2015datedSeptember10,2015,SECPhasdirectedlargesizedcompaniesasclassifiedundertheamendedFifthScheduletotheCompaniesOrdinance,1984,tofollowapplicablefinancialandaccountingreportingstandards.Asaresultoftheseamendments,thecompanyisrequiredtofollowIFRSsasissuedbyIASBandasnotifiedbySECPforannualaccountingperiodsbeginningonorafterJanuary01,2015i.e.fromthestartofcurrentfinancialyear.However,suchamendmentsdonothaveanyimpactonthecompany’sfinancialstatementsasthecompanywasalreadyfollowingtherequiredframework.

2.3 Initial application of standards, amendments or an interpretation to existing standards

The followingamendments toexistingstandardshavebeenpublishedthatareapplicable to thecompany’sfinancial statementscoveringannualperiods,beginningonorafterthefollowingdates:

2.3.1 Standards, amendments and interpretations to approved accounting standards that are effective in current year

Certain standards, amendments and interpretations to approved accounting standards are effective for accounting periodsbeginningonJanuary1,2015butareconsiderednottoberelevantortohaveanysignificanteffectonthecompany’soperationsandare,therefore,notdetailedinthesefinancialstatements,exceptforthefollowing:

-IFRS13‘Fairvaluemeasurement’.Thestandardaimstoimproveconsistencyandreducecomplexitybyprovidingaprecisedefinitionof fairvalueandasinglesourceof fairvaluemeasurementanddisclosure requirements foruseacross IFRSs. The requirementsdonotextendtheuseoffairvalueaccountingbutprovideguidanceonhowitshouldbeappliedwhereitsuseisalreadyrequiredorpermittedbyotherstandardswithinIFRSs.Thestandardonlyaffectsthedisclosuresinthecompany’sfinancialstatments.

- IAS27 (revised) ‘Separatefinancial statements’. This standard replaces thecurrent IAS27 ‘ConsolidatedandSeparateFinancialStatements’(asamendedin2008)andincludestheprovisionsonseparatefinancialstatementsthatareleftafterthecontrolprovisionsofIAS27havebeenincludedinthenewIFRS10.Thecompany’scurrentaccountingtreatmentisalreadyinlinewiththerequirementsofthisstandard.

2.3.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the company

There are certain standards, amendments to the approved accounting standards and interpretations that are mandatory forcompanieshavingaccountingperiodsbeginningonorafterJanuary1,2016butareconsiderednottoberelevantortohaveanysignificanteffectonthecompany’soperationsandare,therefore,notdetailedinthesefinancialstatements,exceptforthefollowing:

-IAS27(Amendments),‘Separatefinancialstatements’areapplicableonaccountingperiodsbeginningonorafterJanuary1,2016.Theseprovideentitiestheoptiontousetheequitymethodtoaccountfor investments insubsidiaries, jointventuresandassociatesintheirseparatefinancialstatements.ThecompanyshallapplytheseamendmentsfromJanuary1,2016andhasnotyetevaluatedwhetheritshallchangeitsaccountingpolicytoavailthisoption.

3. Basis of measurement

3.1 Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconventionasmodifiedbytherevaluationofoperatingfixedassetsandcertainfinancialinstrumentsatfairvalueandrecognitionofcertainemployeeretirementbenefitsatpresentvalue.

3.2 Critical accounting estimates and judgments

Thecompany’ssignificantaccountingpoliciesarestatedinnote4.Notallofthesesignificantpoliciesrequirethemanagementtomakedifficult,subjectiveorcomplexjudgmentorestimates.Thefollowingisintendedtoprovideanunderstandingofthepoliciesthemanagementconsiderscriticalbecauseoftheircomplexity, judgmentofestimation involvedintheirapplicationandtheir impactonthesefinancialstatements.Estimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperience,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Thesejudgmentsinvolveassumptionsorestimatesinrespectoffutureeventsandtheactualresultsmaydifferfromtheseestimates.

a) Employee retirement benefits

Thecompanyusesthevaluationperformedbyanindependentactuaryasthepresentvalueofitsretirementbenefit obligations.Thevaluationisbasedonassumptionsasmentionedinnote4.2.

b) Provision for taxation

Thecompanytakesintoaccountthecurrentincometaxlawandthedecisionstakenbyappellateauthorities.Instanceswherethecompany’sviewdiffersfromtheviewtakenbytheincometaxdepartmentattheassessmentstageandwherethecompanyconsidersthatitsviewsonitemsofmaterialnatureisinaccordancewithlaw,theamountsareshownascontingentliabilities.

c) Useful lives and residual values of property, plant and equipment

Thecompanyreviewstheuseful livesandresidualvaluesofproperty,plantandequipmentonregularbasis.Anychangeinestimates infutureyearsmightaffectthecarryingamountsoftherespectiveitemsofproperty,plantandequipmentwithacorrespondingeffectonthedepreciationchargeandimpairment.

d) Estimated impairment of goodwill

Thecompanytestsannuallywhethergoodwillhassufferedanyimpairment,inaccordancewiththeaccountingpolicystatedinnote4.7.Therecoverableamountsofcash-generatingunitshavebeendeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequiretheuseofestimates(note23).

e) Revaluation surplus on operating fixed assets

Certain operating fixed assets are carried under the revaluation model as per International Accounting Standard (‘IAS’)16 ‘Property,PlantandEquipment’as stated innote4.3.1.Revaluation iscarriedoutwithsufficient regularity toensure thatthecarryingamountofassetsdoesnotdiffermateriallyfromtheir fairvalue.Revaluedamounthasbeendeterminedbyanindependentprofessionalvalueronthebasisofpresentmarketvalue(note7).

f) Fair value of investment in subsidiary

Thefairvalueofinvestmentinsubsidiaryisdeterminedbyusingvaluationtechniques.Thecompanyusesitsjudgmenttoselectavarietyofmethodsandmakeassumptionsthataremainlybasedonmarketconditionsexistingattheendofeachreportingperiod.Thecompanyhasuseddiscountedcashflowanalysisforthispurpose(note24.1).

4. Significant accounting policies

Thesignificantaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoallyearspresented.

4.1 Taxation

Incometaxcomprisescurrentanddeferredtax.Incometaxisrecognizedintheprofitandlossaccountexcepttotheextentthatitrelatestoitemsrecognizeddirectlyinequity,inwhichcaseitisrecognizeddirectlyinequity.

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Current

Provisionofcurrenttaxisbasedonthetaxableincomefortheyeardeterminedinaccordancewiththeprevailinglawfortaxationofincome.Thechargeforcurrenttaxiscalculatedusingprevailingtaxratesortaxratesexpectedtoapplytotheprofitfortheyearifenacted.Thechargeforcurrenttaxalsoincludesadjustments,whereconsiderednecessary,toprovisionfortaxmadeinpreviousyearsarisingfromassessmentsframedduringtheyearforsuchyears.

Thecompanyanditssubsidiary,RelianceSacksLimited(together‘theGroup’)haveoptedforGrouptaxationundersection59AAoftheIncomeTaxOrdinance,2001.

Deferred

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectofalltemporarydifferencesarisingfromdifferencesbetween the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in thecomputationofthetaxableprofit.However,thedeferredtaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthatatthetimeoftransactionneitheraffectsaccountingnortaxableprofitorloss.Deferredtaxliabilitiesaregenerallyrecognizedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognizedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferences,unusedtaxlossesandtaxcreditscanbeutilised.

Deferredtaxliabilitiesareprovidedontaxabletemporarydifferencesarisingfrominvestmentsinsubsidiaries,exceptfordeferredtax

liabilitywherethetimingofthereversalofthetemporarydifferenceiscontrolledbythecompanyanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.Deferredtaxassetsarerecognisedondeductibletemporarydifferencesarisingfrominvestments insubsidiariesonlytotheextentthatit isprobablethetemporarydifferencewill reverseinthefutureandthereissufficienttaxableprofitavailableagainstwhichthetemporarydifferencecanbeutilised.

Deferredtaxiscalculatedattheratesthatareexpectedtoapplytotheperiodwhenthedifferencesreversebasedontaxratesthat

havebeenenactedorsubstantivelyenactedbythebalancesheetdate.Deferredtaxischargedorcreditedintheprofitandlossaccount,exceptinthecaseofitemscreditedorchargedtoothercomprehensiveincomeorequityinwhichcaseitisincludedinothercomprehensiveincomeorequity.

4.2 Employee retirement benefits

Themainfeaturesoftheschemesoperatedbythecompanyforitsemployeesareasfollows:

(a) Defined benefit plan - Gratuity

Thecompanyoperatesanapprovedfundeddefinedbenefitgratuityplanforallpermanentemployeeshavingaserviceperiodofmorethanthreeyearsforexecutivesandsixmonthsforworkersandotherstaff.Provisionsaremadeinthefinancialstatementstocoverobligationsonthebasisofactuarialvaluationscarriedoutannually.ThemostrecentvaluationwascarriedoutasatDecember31,2015usingthe“ProjectedUnitCreditMethod”.

Theactualreturnonplanassetsrepresentsthedifferencebetweenthefairvalueofplanassetsatthebeginningoftheyearandasat

theendoftheyearafteradjustmentsforcontributionsmadebythecompanyasreducedbybenefitspaidduringtheyear.

Theamountrecognizedinbalancesheetrepresentsthepresentvalueofthedefinedbenefitobligationasreducedbythefairvalueoftheplanassets.

Actuarialgainsand lossesarising fromexperienceadjustmentsandchanges inactuarialassumptionsarechargedorcredited toequityinothercomprehensiveincomeintheyearinwhichtheyarise.Pastservicecostsarerecognizedimmediatelyintheprofitandlossaccount.

Thefuturecontributionrateoftheplanincludesallowancesfordeficitandsurplus.ProjectedUnitCreditMethod,usingthefollowingsignificantassumptions,isusedforvaluationofthisscheme:

Discountrate 9%p.a. Expectedrateofincreaseinsalarylevelperannum 8%p.a. Durationofplan(years) 9 Expectedmortalityrate SLIC(2001-2005)mortality table(setback1year)

(b) Defined contribution plan - Provident Fund

Thereisanapproveddefinedcontributoryprovidentfundforallpermanentemployees.Equalmonthlycontributionsaremadebothbythecompanyandemployeestothefundattherateof8.33percentofsalaryfortheexecutivesand10percentofsalaryfortheworkers.

(c) Accumulating compensated absences

Thecompanyprovidesforaccumulatingcompensatedabsences,whentheemployeesrenderservicesthatincreasetheirentitlementtofuturecompensatedabsences.Undertheservicerules,workersandnormalstaffmembersareentitledto18daysleaveperyear.Theleavepolicyformanagementemployeesisasfollows:

Service in the company Annual Leaves Lessthan5Years 18 Lessthan5Years(WorkingonShiftDuties) 22 Morethan5Years 25 Morethan5Years(WorkingonShiftDuties) 29

TheunutilizedAnnualLeavecanbeaccumulateduptoamaximumof2yearsofAnnualLeaves.Anemployeewillbeentitledtoencashtheaccumulatedannualleavesatthetimeofleavingcompanyservice.

Provisionsaremadeannuallytocovertheobligationforaccumulatingcompensatedabsencesbasedonactuarialvaluationandarechargedtoprofitandlossaccount.ThemostrecentvaluationwascarriedoutasatDecember31,2015usingthe“ProjectedUnitCreditMethod”.

Theamountrecognisedinthebalancesheetrepresentsthepresentvalueofthedefinedbenefitobligation.Actuarialgainsandlossesarechargedtotheprofitandlossaccountimmediatelyintheperiodwhentheseoccur.

Projectedunitcreditmethod,usingthefollowingsignificantassumptions,hasbeenusedforvaluationofaccumulatingcompensatedabsences:

Discountrate 9%p.a. Expectedrateofincreaseinsalarylevelperannum 8%p.a. Expectedmortalityrate SLIC(2001-2005)mortality table(setback1year)

4.3 Property, plant and equipment

4.3.1 Operating fixed assets

Operatingfixedassetsexcept freehold land,buildingson freehold land, railway siding,plantandmachineryand toolsandotherequipmentarestatedatcostlessaccumulateddepreciationandanyidentifiedimpairmentloss.Freeholdlandisstatedatrevaluedamountlessanyidentifiedimpairmentlosswhilebuildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentarestatedatrevaluedamountlessaccumulateddepreciationandanyidentifiedimpairmentloss.Revaluationiscarriedoutwith sufficient regularity toensure that thecarryingamountofassetsdoesnotdiffermaterially fromtheir fairvalue.Revaluedamounthasbeendeterminedbyanindependentprofessionalvaluer.Anyaccumulateddepreciationatthedateofrevaluationiseliminatedagainstthegrosscarryingamountoftheasset,andthenetamountisrestatedtotherevaluedamountoftheasset.Costinrelationtootheroperatingfixedassetssignifieshistoricalcost,gainsandlossestransferredfromothercomprehensiveincomeonqualifyingcashflowhedgesasreferredtoinnote4.12.


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Increasesinthecarryingamountsarisingonrevaluationofoperatingfixedassetsarecreditedtosurplusonrevaluationofoperatingfixedassets.Decreases thatoffsetprevious increasesof the sameassetsarechargedagainst this surplus,allotherdecreasesarechargedtoprofitor loss.Eachyear thedifferencebetweendepreciationbasedon revaluedcarryingamountsof theassets (thedepreciationchargedtotheprofitorloss)anddepreciationbasedontheassets’originalcostistransferredfromsurplusonrevaluationofoperatingfixedassetstoothercomprehensiveincome.Alltransfersto/fromsurplusonrevaluationofoperatingfixedassetsarenetofapplicabledeferredtaxation.

Depreciationonoperatingfixedassetsischargedtoprofitorlossonthefollowingmethodsandratessoastowriteoffthedepreciableamountofanassetoveritsestimatedusefullifeaftertakingintoaccounttheirresidualvalues:

Asset category Annual depreciation rate Buildingsonfreeholdland Straightline 3.99to5.13% Buildingsonleaseholdland -do- 10% Railwaysiding -do- 26% Aircraft -do- 10%to10.08% Furnitureandfixtures -do- 10%to26.09% Toolsandotherequipment(otherthanfactoryequipment) -do- 10%to50% Vehicles -do- 20% Plantandmachinery Unitsofproduction Toolsandotherequipment(factoryequipment) -do- Catalyst -do-

The assets’ residual values and useful lives are reviewed, at each financial year end, andadjusted if impact on depreciation issignificant.

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount(note4.5).

Subsequentcostsare included in theasset’s carryingamountor recognisedasa separateasset,asappropriate, onlywhen it isprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothecompanyandthecostoftheitemcanbemeasuredreliably.Allotherrepairandmaintenancecostsarechargedtoincomeduringtheperiodinwhichtheyareincurred.

Thegainor lossondisposalor retirementofanasset representedby thedifferencebetweenthesaleproceedsandthecarryingamountoftheassetisrecognisedasanincomeorexpense.

4.3.2 Capital work-in-progress

Capitalwork-in-progressisstatedatcostlessanyidentifiedimpairmentloss.Allexpenditureconnectedwithspecificassetsincurredduringinstallationandconstructionperiodarecarriedundercapitalwork-in-progress.Thesearetransferredtooperatingfixedassetsasandwhentheseareavailableforuse.

4.3.3 Major spare parts and stand-by equipment

Majorsparepartsandstand-byequipmentqualifyasproperty,plantandequipmentwhenanentityexpectstousethemduringmorethanoneyear.Transfersaremadetooperatingassetscategoryasandwhensuchitemsareavailableforuse.

4.4 Intangible assets

4.4.1 Computer software

Expenditureincurredtoacquirecomputersoftwareiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationandanyidentifiedimpairmentloss.Computersoftwareisamortisedusingthestraightlinemethodoveraperiodoffouryears.


4.4.2 Mining rights

Expenditureincurredtoacquireminingrightsiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationandanyidentifiedimpairmentloss.Miningrightsareamortisedusingthestraightlinemethodoveraperiodoftenyears.


4.5 Impairment of non-financial assets

Assetsthathaveanindefiniteusefullife-forexample,goodwillorintangibleassetsnotreadytouse-arenotsubjecttoamortisationandaretestedannuallyforimpairment.Assetsthataresubjecttoamortisationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashflows(cash-generatingunits).Non-financialassetsotherthangoodwillthatsufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentateachreportingdate.

4.6 Leases

Thecompanyisthelessee.

4.6.1 Finance leases

Leaseswherethecompanyhassubstantiallyalltherisksandrewardsofownershipareclassifiedasfinanceleases.Atinceptionfinanceleasesarecapitalisedatthelowerofpresentvalueofminimumleasepaymentsundertheleaseagreementsandthefairvalueoftheassets.

Therelatedrentalobligations,netoffinancecharges,areincludedinliabilitiesagainstassetssubjecttofinancelease.Theliabilitiesareclassifiedascurrentandlongtermdependinguponthetimingofthepayment.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the balanceoutstanding.Theinterestelementoftherentalischargedtoprofitorlossovertheleaseterm.

Assetsacquiredunderafinanceleasearedepreciatedovertheusefullifeoftheassetonastraight-linemethodattheratesgiveninnote21.Depreciationofleasedassetsischargedtoprofitorloss.

4.6.2 Operating leases

Leaseswhereasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)arechargedtoprofitorlossonastraight-linebasisovertheleaseterm.

4.7 Goodwill

Goodwillrepresentstheexcessofthecostofacquisitionoverthefairvalueoftheidentifiableassetsandliabilitiesofthecompany,byRelianceExports(Private)Limitedatthedateofacquisitioni.e.July14,2005.

GoodwillistestedannuallyforimpairmentandcarriedatitscarryingvalueasatJune30,2007lessanyidentifiedimpairmentlosses.Impairmentlossesongoodwillarenotreversed.

4.8 Investments

Investmentsintendedtobeheldforlessthantwelvemonthsfromthebalancesheetdateortobesoldtoraiseoperatingcapital,areincludedincurrentassets,allotherinvestmentsareclassifiedasnon-current.Managementdeterminestheappropriateclassificationofitsinvestmentsatthetimeofthepurchaseandre-evaluatessuchdesignationonaregularbasis.

4.8.1 Investment in equity instruments of subsidiary

Investmentsinequityinstrumentsofsubsidiaryaredesignateduponinitialrecognitionas‘financialassetsatfairvaluethroughprofitorloss’or‘available-for-salefinancialassets’.Incaseoffinancialassetsatfairvaluethroughprofitorloss,theseareinitiallyrecognizedat fair valuewhile incaseofavailable-for-sale financialassets, theseare initially recognizedat fair valueandassociateddirectlyattributableacquisitioncosts.Subsequently,thesearemeasuredatfairvalueunlessincaseofavailable-for-salefinancialassetswhosefairvaluecannotbemeasuredreliably,thesearecarriedatcost.Forinvestmentshavingquotedpriceinactivemarket,thequotedpricerepresentsthefairvalue.Inothercases,fairvalueismeasuredusingappropriatevaluationmethodology.


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Gainsandlossesonsubsequentre-measurementsoffinancialassetsatfairvaluethroughprofitorlossareincludedintheprofitandlossaccountwhilethoseonre-measurementofavailable-for-salefinancialassetsareincludedinothercomprehensiveincome.Wheninvestmentsclassifiedasavailable-for-saleare soldor impaired, theaccumulated fairvalueadjustments recognized inequityareincludedintheprofitandlossaccount.

ThecompanyisrequiredtoissueconsolidatedfinancialstatementsalongwithitsseparatefinancialstatementsinaccordancewiththerequirementsofIAS27‘ConsolidatedandSeparateFinancialStatements’.

Ateachbalancesheetdate,thecompanyreviewsthecarryingamountsoftheinvestmentsinsubsidiariestoassesswhetherthereisanyindicationthatsuchinvestmentshavesufferedanimpairmentloss.Ifanysuchindicationexists,therecoverableamountisestimatedinordertodeterminetheextentoftheimpairmentloss,ifany.Inmakinganestimateofrecoverableamountoftheseinvestments,themanagementconsidersfuturedividendstreamandanestimateoftheterminalvalueoftheseinvestments.Impairmentlossesarerecognisedasexpenseintheprofitandlossaccount.

Investments in subsidiaries, that sufferedan impairment,are reviewed forpossible reversalof impairmentateach reportingdate.Impairment lossesrecognisedintheprofitandlossaccountoninvestments insubsidiariesandassociatesarereversedthroughtheprofitandlossaccount.

4.8.2 Investments in equity instruments of associate Investments inassociateswherethecompanyhassignificant influencearemeasuredatcost inthecompany’sseparatefinancial

statements.

Thecompanyisrequiredtoissueconsolidatedfinancialstatementsalongwithitsseparatefinancialstatements,inaccordancewiththerequirementsofIAS27‘ConsolidatedandSeparateFinancialStatements’.Investmentsinassociates,intheconsolidatedfinancialstatements,arebeingaccountedforusingtheequitymethod.

Ateachbalancesheetdate,thecompanyreviewsthecarryingamountsoftheinvestmentsinassociatestoassesswhetherthereisanyindicationthatsuchinvestmentshavesufferedanimpairmentloss.Ifanysuchindicationexists,therecoverableamountisestimatedinordertodeterminetheextentoftheimpairmentloss,ifany.Inmakinganestimateofrecoverableamountoftheseinvestments,themanagementconsidersfuturestreamofcashflowsandanestimateoftheterminalvalueoftheseinvestments.Impairmentlossesarerecognisedasexpenseintheprofitandlossaccount.

4.9 Financial assets

4.9.1 Classification

Thecompanyclassifiesitsfinancialassetsinthefollowingcategories:atfairvaluethroughprofitorloss,loansandreceivables,available-for-saleandheldtomaturity.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatthetimeofinitialrecognition.

a) Financial assets at fair value through profit or loss

Financialassetsat fairvalue throughprofitor lossarefinancialassetsheld for tradingandfinancialassetsdesignatedupon initialrecognitionasatfairvaluethroughprofitorloss.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedashedges.Afinancialassetisclassifiedasheldfortradingifacquiredprincipallyforthepurposeofsellingintheshortterm.Assetsinthiscategoryareclassifiedascurrentassetsifexpectedtobesettledwithintwelvemonths,otherwise,theyareclassifiedasnon-current.

b) Loans and receivables

Loansand receivablesarenon-derivative financialassetswith fixedordeterminablepayments thatarenotquoted inanactivemarket.Theyareincludedincurrentassets,exceptformaturitiesgreaterthantwelvemonthsafterthebalancesheetdate,whichareclassifiedasnon-currentassets.Loansandreceivablescomprisesecuritydeposits,tradedebts,loans,advances,depositsandotherreceivablesandcashandcashequivalentsinthebalancesheet.

c) Available-for-sale financial assets

Available-for-salefinancialassetsarenon-derivativesthatareeitherdesignatedinthiscategoryornotclassifiedinanyoftheothercategories.Theyareincludedinnon-currentassetsunlessmanagementintendstodisposeoftheinvestmentswithintwelvemonthsfromthebalancesheetdate.

d) Held to maturity

Financialassetswithfixedordeterminablepaymentsandfixedmaturity,wheremanagementhastheintentionandabilitytoholdtillmaturityareclassifiedasheldtomaturityandarestatedatamortisedcost.

4.9.2 Recognition and measurement

Allfinancialassetsarerecognisedatthetimewhenthecompanybecomesapartytothecontractualprovisionsoftheinstrument.Regularpurchasesandsalesofinvestmentsarerecognisedontrade-date–thedateonwhichthecompanycommitstopurchaseorselltheasset.Financialassetsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.Financialassetscarriedatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvalueandtransactioncostsareexpensedintheprofitandlossaccount.Financialassetsarederecognisedwhentherightstoreceivecashflowsfromtheassetshaveexpiredorhavebeentransferredandthecompanyhastransferredsubstantiallyalltherisksandrewardsofownership.Available-for-salefinancialassetsandfinancialassetsat fairvaluethroughprofitor lossaresubsequentlycarriedat fairvalue.Available-for-salefinancialassetsarecarriedatcostincasefairvaluecannotbemeasuredreliably.Loansandreceivablesandheld-to-maturityinvestmentsarecarriedatamortisedcostusingtheeffectiveinterestratemethod.

Gainsorlossesarisingfromchangesinthefairvalueofthe‘financialassetsatfairvaluethroughprofitorloss’categoryarepresentedintheprofitandlossaccountintheperiodinwhichtheyarise.Dividendincomefromfinancialassetsatfairvaluethroughprofitorlossisrecognisedintheprofitandlossaccountaspartofotherincomewhenthecompany’srighttoreceivepaymentsisestablished.

Changesinthefairvalueofsecuritiesclassifiedasavailable-for-salearerecognisedinothercomprehensiveincome.Whensecuritiesclassifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsrecognisedinequityareincludedintheprofitand lossaccountasgainsand losses from investmentsecurities. Interestonavailable-for-salesecuritiescalculatedusing theeffectiveinterestmethodisrecognisedintheprofitandlossaccount.Dividendsonavailable-for-saleequityinstrumentsarerecognisedintheprofitandlossaccountwhenthecompany’srighttoreceivepaymentsisestablished.

Thecompanyassessesateachbalancesheetdatewhetherthereisobjectiveevidencethatafinancialassetoragroupoffinancialassetsis impaired.Ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativelossisremovedfromequityandrecognisedintheprofitandlossaccount.Impairmentlossesrecognisedintheprofitandlossaccountonequityinstrumentsarenotreversedthroughtheprofitandlossaccount.Impairmenttestingoftradedebtsandotherreceivablesisdescribedinnote4.15.

4.10 Financial liabilities

Allfinancialliabilitiesarerecognisedatthetimewhenthecompanybecomesapartytothecontractualprovisionsoftheinstrument.

Afinancial liability isderecognisedwhentheobligationundertheliability isdischargedorcancelledorexpired.Whereanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability,andthedifferenceinrespectivecarryingamountsisrecognisedintheprofitandlossaccount.

4.11 Offsetting of financial assets and financial liabilities

Financialassetsandfinancialliabilitiesareoffsetandthenetamountisreportedinthefinancialstatementsonlywhenthereisalegallyenforceablerighttosetofftherecognizedamountandthecompanyintendseithertosettleonanetbasisortorealizetheassetsandtosettletheliabilitiessimultaneously.

4.12 Derivative financial instruments

Theseareinitiallyrecordedatcostonthedateaderivativecontractisenteredintoandareremeasuredtofairvalueatsubsequentreportingdates.Themethodofrecognizingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.Thecompanydesignatescertainderivativesascashflowhedges.

Thecompanydocumentsattheinceptionofthetransactiontherelationshipbetweenthehedginginstrumentsandhedgeditems,aswellasitsriskmanagementobjectiveandstrategyforundertakingvarioushedgetransactions.Thecompanyalsodocumentsitsassessment,bothathedgeinceptionandonanongoingbasis,ofwhetherthederivativesthatareusedinhedgingtransactionsarehighlyeffectiveinoffsettingchangesincashflowofhedgeditems.

Theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyascashflowhedgesisrecognizedinothercomprehensive income.Thegainor loss relatingtothe ineffectiveportion is recognized immediately intheprofitand lossaccount.

Amountsaccumulatedinothercomprehensiveincomearerecognisedinprofitandlossaccountintheperiodswhenthehedgeditemwillaffectprofitorloss.However,whentheforecasthedgedtransactionresultsintherecognitionofanon-financialassetoraliability,thegainsandlossespreviouslydeferredinothercomprehensiveincomearetransferredfromothercomprehensiveincomeandincludedintheinitialmeasurementofthecostoftheassetorliability.Thechangesinfairvaluere-measurementofderivativeswhichthecompanyhasnotdesignatedasahedginginstrumentarerecognisedintheprofitandlossaccount.Tradingderivativesareclassifiedasacurrentassetorliability.

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4.13 Stores and spare parts

Thesearevaluedatweightedaveragecostexcept for items in transitwhicharestatedat invoicevalueplusotherchargespaidthereontillthebalancesheetdate.Foritemswhichareslowmovingand/oridentifiedasobsolete,adequateprovisionismadeforanyexcessbookvalueoverestimatedrealisablevalue.Thecompanyreviewsthecarryingamountofstoresandsparesonaregularbasisandprovisionismadeforobsolescence.

4.14 Stock-in-trade

Allstocksarevaluedatthelowerofcostandnetrealizablevalue.Costinrelationtorawandpackingmaterialsandgoodspurchasedforresale,exceptforthoseintransit,signifiesweightedaveragecostandthatrelatingtomidproductsandownmanufacturedfinishedgoods,annualaveragecostcomprisingcostofdirectmaterials,labourandappropriatemanufacturingoverheads.

Materialsintransitarestatedatcostcomprisinginvoicevalueplusotherchargesincurredthereon.

Netrealizablevaluesignifiestheestimatedsellingpriceintheordinarycourseofbusinesslesscostsnecessarilytobeincurredinordertomakethesale.Provisionismadeinthefinancialstatementsforobsoleteandslowmovingstock-in-tradebasedonmanagementestimate.

4.15 Trade debts and other receivables

Tradedebtsandotherreceivablesarerecognisedinitiallyatinvoicevalue,whichapproximatesfairvalue,andsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionfordoubtfuldebts.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethatthecompanywillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Significantfinancialdifficultiesofthedebtors,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Whenatradedebtisuncollectible,itiswrittenoffagainsttheprovision.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedtotheprofitandlossaccount.

4.16 Cash and cash equivalents

Cashandcashequivalents includescash inhand,depositsheldatcallwithbanks,other short-termhighly liquid investmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts/shorttermborrowings.

4.17 Borrowings

Borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.Borrowingsaresubsequentlystatedatamortisedcost,anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvalueisrecognisedintheprofitandlossaccountovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.Financecostsareaccountedforonanaccrualbasisandarereportedunderaccruedfinancecoststotheextentoftheamountremainingunpaid.

Borrowingsareclassifiedascurrentliabilitiesunlessthecompanyhasanunconditionalrighttodefersettlementoftheliabilityforatleasttwelvemonthsafterthebalancesheetdate.

4.18 Trade and other payables

Tradeandotherpayablesare recognised initiallyat fair valueand subsequentlymeasuredatamortisedcostusing theeffectiveinterestmethod.Exchangegainsandlossesarisingontranslationinrespectofliabilitiesinforeigncurrencyareaddedtothecarryingamountoftherespectiveliabilities.

4.19 Provisions

Provisionsarerecognizedwhenthecompanyhasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimateoftheamountcanbemade.Provisionsarenotrecognisedforfutureoperatinglosses.

Where there are a number of similar obligations, the likelihood that an outflow shall be required in settlement is determined byconsideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.

Provisionsaremeasuredatthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligationusingapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheobligation.Theincreaseintheprovisionduetopassageoftimeisrecognisedasinterestexpense.

4.20 Foreign currency transactions and translation

a) Functional and presentation currency

Itemsincludedinthefinancialstatementsofthecompanyaremeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichthecompanyoperates(thefunctionalcurrency).ThefinancialstatementsarepresentedinPakRupees,whichisthecompany’sfunctionalandpresentationcurrency.

b) Transactions and balances

Allmonetaryassetsandliabilities inforeigncurrenciesaretranslatedintoPakRupeesatexchangeratesprevailingatthebalancesheetdate.TransactionsinforeigncurrenciesaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsandliabilitiesthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsand liabilitiesdenominated in foreigncurrencythatarestatedatfairvaluearetranslatedintoPakRupeesatexchangeratesprevailingatthedatewhenfairvaluesaredetermined.Exchangegainsandlossesareincludedinprofitandlossaccount.

4.21 Borrowing Costs

Generalandspecificborrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets,whichareassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduseorsale.Investmentincomeearnedonthetemporaryinvestmentof specificborrowingspending theirexpenditureonqualifyingassets isdeducted fromtheborrowingcostseligible forcapitalisation.Allotherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.

4.22 Revenue recognition

Revenueisrecognisedwhenitisprobablethattheeconomicbenefitswillflowtothecompanyandtherevenuecanbemeasuredreliably.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableonthefollowingbasis:

-Revenuefromsaleoffertilizerproductsisrecognizedondispatchtocustomers.

-RevenuefromsaleofCERsisrecognisedonthegenerationoftheEmissionReductionswhenafirmcommitmentforsaleofCERsexistswithabuyer.

-Returnondepositsisaccruedonatimeproportionbasisbyreferencetotheprincipaloutstandingandtheapplicablerateofreturn.

-Dividend incomeandentitlementofbonus sharesare recognisedwhen the right to receive suchdividendandbonus shares isestablished.

-Governmentsubsidyonsaleoffertilizerisrecognisedwhentherighttoreceivesuchsubsidyhasbeenestablishedandtheunderlyingconditionsaremet.

4.23 Share capital

Ordinarysharesareclassifiedasequityandrecognisedattheirfacevalue.Incrementalcostsdirectlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax.

4.24 Dividend

Dividenddistributiontothecompany’smembersisrecognisedasaliabilityintheperiodinwhichthedividendsareapproved.

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2015 2014 (Rupeesinthousand)

Openingbalance-netoftax 14,491,103 11,884,336 Revaluationsurplusduringtheyear -note20.1 – 3,055,295 Deferredtaxonrevaluationsurplus -note13 647,560 (365,882) Surplustransferredtoothercomprehensiveincomeforthe yearonaccountofincrementaldepreciation-netoftax (115,832) (82,646)

Closingbalance-netoftax -note7.1 15,022,831 14,491,103

7.1 IncludessurplusonrevaluationoffreeholdlandamountingtoRs5,865.66million(2014:Rs5,865.66million).


8. Long term finances - secured Redeemablecapital -note8.1 – – Longtermloans -note8.2 3,042,161 1,966,071 3,042,161 1,966,071 Currentportionshownundercurrentliabilities -notes8.1&8.2 (1,072,022) (901,189) 1,970,139 1,064,882

8.1 Redeemable capital ThisrepresentsPrivatelyPlacedTermFinanceCertificates(‘PPTFCs’)thatwereredeemedlastyear.


Opening balance – 1,625,000 Redeemedduringtheyear – (1,625,000) Currentportionshownundercurrentliabilities – – – –


8.2 Long term loans Thesehavebeenobtainedfromthefollowingfinancialinstitutions StandardCharteredBank(Pakistan)Limited-Loan1 -note8.2.1 – 166,667 StandardCharteredBank(Pakistan)Limited-Loan2 -note8.2.2 333,332 500,000 FaysalBankLimited -note8.2.3 250,000 416,667 PakistanKuwaitInvestmentCompany(Private)Limited -note8.2.4 62,500 187,500 PAIRInvestmentCompanyLimited -note8.2.5 285,714 428,571 SoneriBankLimited -note8.2.6 133,333 266,666 AlliedBankLimited -note8.2.7 1,977,282 –

3,042,161 1,966,071 Currentportionshownundercurrentliabilities (1,072,022) (901,189)

1,970,139 1,064,882

5. Issued, subscribed and paid up share capital

2015 2014 2015 2014 (Numberofshares) (Rupeesinthousand)

2,791,260 2,791,260 OrdinarysharesofRs10eachfullypaidincash 27,913 27,913 447,208,740 447,208,740 OrdinarysharesofRs10eachissuedasfullypaidbonusshares 4,472,087 4,472,087 450,000,000 450,000,000 4,500,000 4,500,000

2015 2014 (Numberofshares)

Ordinarysharesofthecompanyheldbyassociated undertakingsasatyearendareasfollows: RelianceCommodities(Private)Limited 7,136,613 7,136,613 FatimaSugarMillsLimited 84,145,872 71,250,558 FazalClothMillsLimited – 25,790,610 ArifHabibCorporationLimited 135,000,000 135,000,000 AmirFineExports(Private)Limited 12,895,296 –

239,177,781 239,177,781


6. Reserves Capital: -Fairvaluereserve 99,577 66,039 Revenue: -Generalreserve 2,098,313 2,098,313 -Un-appropriatedprofit/(accumulatedloss) 2,190,620 (382,044)

4,288,933 1,716,269

4,388,510 1,782,308

7. Surplus on revaluation of operating fixed assets Thisrepresentssurplusoverbookvalueresultingfromtherevaluationoffreeholdland,buildingsonfreeholdland,plantand

machinery,railwaysidingandtoolsandotherequipment,adjustedbyincrementaldepreciationarisingoutofrevaluationofabovementionedassetsexceptfreeholdland.Thevaluationwascarriedoutbyanindependentvaluer,M/sPirsonsChemicalEngineering (Private) Limited, on August 31, 2014. Surplus on revaluation of operating fixed assets can be utilized by thecompanyonlyforthepurposesspecifiedinsection235oftheCompaniesOrdinance,1984.

Therevaluationsurplusrelatingtoabovementionedoperatingfixedassetsexcludingfreeholdlandisnetofapplicabledeferredincometaxes.Incrementaldepreciationrepresentsthedifferencebetweentheactualdepreciationontheabovementionedassetsexcludingfreeholdlandandtheequivalentdepreciationbasedonthehistoricalcostoftheseassets.Themovementinrevaluation surplus is as follows:

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8.2.1 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom9.21%to11.59%perannum.

8.2.2Thisrepresentstermloanfacilityforbalancesheetrestructuring.Itisrepayableinfoursemi-annualinstallmentsofRs83.333millioneachendingonDecember31, 2017.Markup ispayablemonthlyat the rateof threemonthsKarachi Inter-BankOfferedRate(‘KIBOR’)plus1.50%perannum.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.07%to11.13%perannum.Theloanissecuredbyfirstparipassuchargeoverthepresentandfuturecurrentassetsofthecompany.

8.2.3 Thisrepresentsatermfinancefacilityobtainedtofinancethecompany’scapitalexpenditurerequirements.Itisrepayableinthreesemi-annualinstallmentsofRs83.333millioneachendingonJune14,2017andcarriesmarkupattherateofsixmonthsKIBORplus1.70%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.22%to11.37%perannum.ItissecuredbyaparipassuchargeonallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft,theassetscomprisingoftheCleanDevelopmentMechanism(‘CDM’)project,thecompletecarbondioxiderecoveryplant/liquefactionplantandthelandandbuildingsoftheexcludedassets.

8.2.4 Thisrepresentstermfinancefacilitytofinancethecompany’scapacityexpansion.ItisrepayableonJune29,2016andcarriesmarkupattherateofsixmonthsKIBORplus2.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.76%to11.09%perannum.It issecuredbyafirstparipassuchargeonallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetank,toolsanditsspares,toolsandaccessories.

8.2.5 This representstermfinancefacility forbalancesheet restructuringandcompany’scapitalexpenditurerequirements. It isrepayableinfoursemi-annualinstallmentsofRs71.429millioneachendingonAugust27,2017andcarriesmarkupattherateofsixmonthsKIBORplus2.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom9.32%to12.44%perannum.Itissecuredbyafirstparipassuchargeonthecompany’spresentandfuturefixedassets.

8.2.6 Thisrepresentstermfinancefacilitytomeetthecompany’scapitalexpenditure/repaymentofexpensivedebt.Itisrepayableintwosemi-annual installmentsofRs66.667millioneachendingNovember2,2016andcarriesmarkupattherateofsixmonthsKIBORplus1.75%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.22%to11.91%perannum.Itissecuredbyafirstparipassuchargeonthecompany’spresentandfuturefixedassetsincludinglandandbuildingandmachineryexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetank,toolsanditsspares,toolsandaccessoriesandthelandandbuildingsrelatedtotheseassets.

8.2.7 Thisrepresentstermfinancefacilitytomeetcompany’srepaymentofimportbillpayable.Itisrepayableintensemi-annualinstallmentsofRs200millioneachcommencingfromMay24,2016andcarriesmarkupattherateofsixmonthsKIBORplus2%perannum,payablesemi-annualy.Themarkupratechargedduringtheyearontheoutstandingbalanceis8.52%perannum.ItissecuredbyafirstparipassuchargeoverallpresentandfutureplantandmachineryofthecompanyexcludingassetscomprisingofAmmoniaConverterBasket,theLamontboilerforNitricAcid,theassetscomprisingoftheCDMproject,the complete carbon dioxide recovery plant/liquefaction plant along with carbon dioxide static storage tank and anexclusivechargeovertheBombardierChallengeraircraft.Thereconciliationofthecarryingamountofloanisasfollows:


Receipt 2,000,000 – Initialtransactioncost (23,200) –

1,976,800 –

Amortizationofinitialtransactioncost -note34 482 –

1,977,282 – Currentmaturity (400,000) –

1,577,282 –

9. Long term loans from related parties - unsecured

Thesehavebeenobtainedfromthefollowingrelatedparties: FatimaHoldingsLimited(associatedcompany) – 442,287 RelianceCommodities(Private)Limited(associatedcompany) 877,982 34,292 MemberandChairman’sspouse 371,491 313,032 Chairman’schildren 116,914 – Directors 866,565 36,357

-note9.1 2,232,952 825,968

9.1 This is repayable in a period of two years commencing from January 1, 2017 on terms that are to bemutually agreedbetweentheparties.Markupispayablesemi-annuallyatarateofsixmonthsKIBORplus1.5%perannum.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.98%to8.51%perannum.

10. Import bill payable - secured

ThishasbeenpaidduringtheyearthroughproceedsofloanacquiredfromAlliedBankLimitedasreferredtoinnote8.2.7tothesefinancialstatements.

11. Long term deposits

Theserepresentinterestfreesecuritydepositsfromcustomersandcarriagecontractorsandarerepayableoncancellation/withdrawalofthedealershiporoncessationofthebusinesswiththecompanyrespectively.


12. Deferred liabilities

Accumulatingcompensatedabsences -note12.1 97,166 80,812 Retirementbenefits-gratuityfund -note12.2 35,814 34,977

132,980 115,789

12.1 Accumulating compensated absences Openingliability 80,812 86,320 Chargetoprofitandlossaccount -note12.1.2 25,038 3,925

105,850 90,245 Paymentsmadeduringtheyear (8,684) (9,433)

Liabilityasatyearend 97,166 80,812

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12.1.1 Movement in liability for accumulating compensated Absences Openingpresentvalueofaccumulatingcompensatedabsences 80,812 86,320 Currentservicecost 15,971 11,830 Interestcost 8,029 5,741 Benefitspaidduringtheyear (8,684) (9,433) Remeasurementduringtheyear 1,038 (13,646)

Closingpresentvalueofaccumulatingcompensatedabsences 97,166 80,812

12.1.2 Charge for the year

Currentservicecost 15,971 11,830 Interestcost 8,029 5,741 Remeasurementduringtheyear 1,038 (13,646)

Expensechargedtotheprofitandlossaccount 25,038 3,925

Amountsforcurrentperiodandpreviousfourannualperiodsofaccumulatingcompensatedabsencesareasfollows: 2015 2014 2013 2012 2011

AsatDecember31 (Rupeesinthousand) Presentvalueofaccumulating compensatedabsences 97,166 80,812 86,320 84,150 66,001

Experienceadjustmentarisingonobligation 1,038 (13,646) – – –

Theaveragenumberofleavesaccumulatedperannumistendaysforexecutivesandfivedaysforworkersandotherstaff.


12.2 Gratuity fund Theamountsrecognisedinthebalancesheetareasfollows: Presentvalueofdefinedbenefitobligation 171,990 149,293 Fairvalueofplanassets (136,176) (114,316)


Openingnetliability 34,977 40,152 Chargetoprofitandlossaccount 24,630 24,449 Chargetorelatedparty 8,304 9,240 Netremeasurementsfortheyear 2,880 1,290 Contributionbythecompany (34,977) (40,154)



Themovementinthepresentvalueofdefinedbenefitobligationisasfollows: Openingpresentvalueofdefinedbenefitobligation 149,293 129,962 Currentservicecost 31,098 31,179 Interestcost 14,620 14,762 Benefitspaidtoout-goingmembersduringtheyear (20,104) (23,738) Remeasurementsonobligation (2,917) (2,872)

Presentvalueofdefinedbenefitobligationasatyearend 171,990 149,293

Themovementinfairvalueofplanassetsisasfollows: Openingfairvalue 114,316 89,810 Expectedreturnonplanassets 12,784 12,252 Companycontributions 34,977 40,154 Benefitspaidtoout-goingmembersduringtheyear (20,104) (23,738) Remeasurementsonfairvalueofplanassets (5,797) (4,162) Fairvalueasatyearend 136,176 114,316

Plan assets are comprised as follows: Mixedfunds 104,574 76,086 Cash 31,602 38,230 136,176 114,316

ThecompanyisexpectedtocontributeRs30.258milliontothegratuityfundinthenextyear. Thepresentvalueofdefinedbenefitobligation,thefairvalueofplanassetsandthesurplusordeficitofgratuityfundisas follows: 2015 2014 2013 2012 2011

(Rupeesinthousand) Presentvalueofdefinedbenefitobligation (171,990) (149,293) (129,962) (115,230) (88,126) Fairvalueofplanassets 136,176 114,316 89,810 82,105 64,824

Loss (35,814) (34,977) (40,152) (33,125) (23,302)

Experienceadjustmentonobligation -2% -2% 5% 3% 6% Experienceadjustmentonplanassets -4.26% -3.64% -1.44% -0.95% 0.89%

Thesensitivityofthedefinedbenefitobligationtochangesintheweightedprincipalassumptionsis:

Impact on defined benefit obligation Change in Increase in Decrease in assumptions assumption assumption (Rupeesinthousand)

Discountrate 1% 157,335 189,091 Salarygrowthrate 1% 189,344 156,856

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13. Deferred taxation

Liability/(asset)fordeferredtaxationcomprisestemporarydifferencesrelatingto: Acceleratedtaxdepreciation 8,842,825 10,408,173 Accumulatingcompensatedabsences (29,150) (28,284) Provisionfordoubtfulreceivable (2,673) (3,119) Postretirementmedicalbenefitsandotherallowancespayable (3,454) (4,030) Interestreceivable 6,982 6,752 Unrealisedrecoveryofchemicalcatalyst 48,820 56,957 Transactioncostonlongtermloans 6,815 – Investmentinsubsidiary 28,910 23,505 Goodwill 991,549 1,092,676 Unusedtaxlosses (1,455,557) (1,108,744) Unusedtaxcredits (462,982) (256,646)

7,972,085 10,187,240

Deferredtaxasseton tax lossesavailable forcarry forwardandthose representingminimumtaxpaidavailable forcarryforwardundersection113oftheIncomeTaxOrdinance,2001arerecognizedtotheextentthattherealisationofrelatedtaxbenefitsthroughfuturetaxableprofitsisprobable.

Thegrossmovementinnetdeferredtaxliabilityduringtheyearisasfollows: 2015 2014 (Rupeesinthousand)

Openingbalance 10,187,240 9,932,611 Deferredtaxonrevaluationsurplus -note7 (647,560) 365,882 Chargedtoothercomprehensiveincome 5,405 16,285 Creditedtoprofitandlossaccount -note37 (1,573,000) (127,538)

Closingbalance 7,972,085 10,187,240

14. Short term borrowing from related party - secured

Asofthebalancesheetdate,thisrepresentsarenewablelimit,inthenatureofrunningfinancefacility,ofRs3billionavailablefromFatimaFertilizerCompanyLimited(‘FATIMA’),arelatedparty(associatedcompany).Duringtheyear,thisfacilitywaschangedfromShortTermLoantoarenewablelimit,inthenatureofrunningfinancefacility,afterthechangeintermsoftheloanwereapprovedbythemembersofFATIMAintheirAnnualGeneralMeetingheldonApril30,2015.MarkupispayablequarterlyattherateofsixmonthsKIBORplus2.12%.Therateofmarkupcharged,duringtheyear,rangesfrom8.63%to11.75%perannum.Thisfacilityissecuredagainstrankingchargeonallpresentandfuturefixedassetsofthecompany.Aspertheterms,thefacilitywasrepayablebyDecember31,2015.

However,inDecember2015,thecompanysentacommunicationtoFATIMA,requestingittorenewthefacilityforafurther

periodofoneyearonthesametermsandconditionsasalreadyagreedbetweenthetwocompanies.

Basedonthecommunicationfromthecompany,consideringitaviableinvestment,theBoardofDirectorsofFATIMA,initsmeetingheldonDecember29,2015,agreedtorenewthisfacilityforafurtherperiodofoneyearthatwillbepresentedformembers’approvalintheupcomingAnnualGeneralMeetingofFATIMA.


15. Short term borrowings - secured Runningfinances -note15.1 10,290,326 2,892,453 Termfinances -note15.2 4,861,288 1,744,993 15,151,614 4,637,446

15.1 Running finances

Short term runningfinance facilitiesavailable fromcommercialbanksundermark-uparrangementsamount toRs13,279million(2014:Rs4,244million).Theratesofmarkuprangefrom7.26%to12.40%ontheoutstandingbalanceorpartthereof.Theaggregate runningfinancesare securedagainstpledgeof stock-in-tradeas referred to innote26.1and registeredhypothecation charge on current and fixed assets of the company including the Lamont Boiler for Nitiric Acid, assetscomprisingCDMprojectand thecompletecarbondioxide recoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankofthecompany.IncludedintheaboveisarunningfinanceofRs385.504million(2014:Rs376.199million)[availablelimit:Rs400million(2014:Rs400million)]fromSummitBankLimited,arelatedparty(associatedcompany).

15.2 Term finances

TermfinancefacilitiesavailablefromvariouscommercialbanksunderprofitarrangementsamounttoRs5,509million(2014:Rs1,845million).Theratesofprofitrangefrom7.64%to12.13%ontheoutstandingbalanceorpartthereof.Theaggregatetermfinancesaresecuredagainstfirstparipassuchargeoverallcurrentandfixedassetsof thecompany includingtheLamontBoiler,AmmoniaConverterBasket,assetscomprisingCDMprojectandthecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankofthecompany.

15.3 Letters of credit and guarantees

OftheaggregatefacilityofRs4,690million(2014:Rs4,542million)foropeninglettersofcreditandRs18million(2014:Rs18million)forguarantees,theamountutilisedatDecember31,2015was2,030million(2014:1,326million)andRs17million(2014:Rs17million)respectively.Thefacilityforopeninglettersofcreditissecuredagainstimportdocumentsandregisteredjointparipassuchargeovercurrentassetswhereasfacilityforguaranteesissecuredagainstregisteredjointparipassuchargeovercurrentassets.

16. Payable to Privatization Commission of Pakistan

RelianceExports(Private)Limited(‘REL’),underthetermsandconditionsstatedinthe‘SharePurchaseAgreement’(‘theAgreement’),acquired100%sharesinthecompanyonJuly14,2005throughtheprocessofprivatization.UnderthetermsoftheAgreement,thepurchaseconsideration,inadditiontolumpsumcashpayment,includedafurtherpaymentequivalentto90%ofthecompany’sclaimoftaxrefundaggregatingtoRs2,814.511millionfortheassessmentyears1993-94,1995-96through2002-2003andtaxyears2003and2004.TheamountispayabletothePrivatizationCommissionintheeventofandatthetimeofcashreceiptoftherefundfromtheconcernedtaxauthorities.

Theamount recognized in thesefinancial statementsaspayable toPrivatizationCommission isnetoffRs 240.119million

which,accordingtothemanagementofthecompany,hasalreadybeenwithdrawnbythePreviousMembersaspartofthedividenddistribution for theyearendedJune30,2005.Themanagementof thecompany feels that theAgreementaspresentlyworded,ifexecuted,wouldresultintodoublepaymentofthesameamounttothePrivatizationCommission/PreviousMembers,firstly,aspartoftheprofitsfortheyearendedJune30,2005(computedwithoutrecognitionofthetaxexpensefortheyearsforwhichwhentherefundisissued,anamountequivalentto90%wouldbetherightofthePrivatizationCommission/PreviousMembers)andsecondly,atthetimetherefundisreceivedfromthetaxauthoritieswhenanamountequivalentto90%ofsuchrefundispaidofftothePrivatizationCommission,asagreed.ThemanagementofthecompanyfeelsthatsuchdoublepaymentisneithertheintentionnorwarrantedunderthespecificprovisionsoftheAgreement.

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UpondissolutionofRELanditsamalgamationwiththecompanyonJuly14,2005,thisliabilitywasrecognisedinthebooksofthecompanybeingthesurvivingentityuponREL’samalgamationwiththecompanyinaccordancewiththeSchemeofArrangementforAmalgamation.


17. Trade and other payables

Tradecreditors -note17.1 2,674,413 3,617,238 Suigasbillpayable -note17.2 – 6,147 Securitydeposits 32,105 16,652 Accruedliabilities -notes17.3&17.4 2,387,327 1,581,095 Workers’profitparticipationfund -note17.5 717,710 702,148 Workers’welfarefund 266,787 244,046 Customers’balances 184,712 1,246,120 Bankguaranteesdiscounted 1,987,767 76,100 Duetorelatedparty – 16,838 Duetoemployees’providentfundtrust 1,312 177 Withholdingtaxpayable 61,095 11,043 Excisedutypayable 1,724 1,724 Salestaxpayable – 13,397 Electricitydutypayable 30,171 22,558

8,345,123 7,555,283

17.1 IncludesanamountofRs76.389million(2014:Rs24.092million)payabletoRelianceSacksLimited(‘RSL’),arelatedparty(subsidiary).

17.2 This amount is payable to Sui NorthernGas Pipelines Limited (‘SNGPL’), a related party (associated company) againstpurchaseofgas.

17.3 AccruedliabilitiesincludeRs1,071million(2014:Rs1,061million)onaccountofGasInfrastructureDevelopmentCess(‘GIDC’).Duringtheyear,theParliamentpassedtheGIDCAct2015 inMay2015whichseeksto imposeGIDClevysince2011.ThecompanyhaschallengedthevalidityandpromulgationofGIDCAct,2015beforetheHonorableSindhHighCourt,whereintheCourtpassedinterimorders,therebyrestrainingSNGPLfromchargingorrecoveringGIDC.

17.4 IncludesbonusofRs7.5million(2014:Rs7.5million)payabletotheDirectorsofthecompany.


17.5 Workers’profitparticipationfund Openingbalance 702,148 727,628 Provisionfortheyear -note35 59,843 –

761,991 727,628

Paymentsmadeduringtheyear (44,281) (25,480)

Closingbalance 717,710 702,148

ThecompanyhasanagreementwiththeWorkersWelfareFund(‘WWF’),MinistryofLabourandManpower,GovernmentofPakistanwherebythebalanceamountofWorkers’ProfitParticipationFund(‘WPPF’)remainingafterdeductingtheworkers’portionofWPPFthatisrequiredtobedepositedintheWWF,wouldbeusedforestablishingahospitalfortheworkersasperthemechanismdefinedinthatagreement.


18. Accrued finance cost Accruedmarkupon: -longtermloans-secured 38,259 26,828 -longtermloansfromrelatedparties-unsecured -note18.1 97,712 – -shorttermborrowingfromrelatedparty-secured -note18.2 97,701 176,641 -shorttermborrowings-secured -note18.3 215,751 116,062

449,423 319,531

18.1 Thisamountispayabletothefollowingrelatedparties: RelianceCommodities(Private)Limited(associatedcompany) 39,152 – MemberandChairman’sspouse 16,015 – Chairman’schildren 5,067 – Directors 37,478 – 97,712 –

18.2 ThisamountispayabletoFATIMA,arelatedparty(associatedcompany).

18.3 IncludesanamountofRs8.314million(2014:11.574million)payabletoSummitBankLimited,arelatedparty(associated company).

19. Contingencies and commitments

19.1 Contingencies

(i) ThecompanyhasnettedoffanamountofRs240.119millionfromtheamountpayabletothePrivatizationCommission,aspartofpurchaseconsideration,atthetimeandintheeventtherefundisreceivedfromthetaxauthorities.Incase,thecompany’scontention relating topossibledoublepayment isnotaccededtoby theotherparty to theSharePurchaseAgreement,thecompanyiscontingently liabletotheaforesaidamountofRs240.119million. Incase,theamountbecomespayable,thecorrespondingeffectwouldbereflectedinthecomputationofgoodwill.

(ii) Thecompanyhasissuedfollowingguaranteesinfavourof:

-SNGPLagainstgassaleamountingtoRs10million(2014:Rs10million). -PakistanStateOilCompanyLimited(‘PSO’)againstfuelforaircraftamountingtoRs7million(2014:Rs7million). -MeezanBankLimitedassecurityagainstfinanceobtainedbyitssubsidiary,RSL.

(iii) As at June 30, 2004, the company had investment of 140,000 ordinary shares of Rs 10 each valuing Rs 100,000 inNationalFertilizerMarketingLimited,beingtheassociatedcompanyonthatdate.OnMay20,2005,this investmentwastransferredtoNationalFertilizerCorporationofPakistan(Private)Limitedbythemanagementofthecompany.However, the new buyer, REL filed an application before PrivatizationCommission challenging this transfer on thegroundsthatsuchtransferhadbeencarriedoutagainstthetermsandconditionsofthebiddocuments.Incaseofapositiveoutcometotheapplication,thisinvestmentwouldbere-instated.

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(iv) AnamountofRs 129.169millionwaswithdrawnby thepreviousmembersof thecompanyaspartofdividend fortheyearendedJune30,2005undertheSharePurchaseAgreement.Outoftheaggregateamount,Rs89.39millionrepresents thevalueofcertaincatalysts recovered inconsequenceofcleandownoperationsof theplantprior toundertakingtheprocessofprivatization,whichwasaccountedforasincomeinthefinancialstatementsfortheyearendedJune30,2005inthelightofapplicablefinancialreportingframework.

Themanagementofthecompanyfeelsthatnotwithstandingtheapplicabilityofthefinancialreportingframework,onthefinancialstatementsfortheyearendedJune30,2005,theamountwasnotdistributableaspartofdividendforthatyearinviewoftheclearunderstandingbehindtheexecutionoftheAgreementascategoricallyconfirmed,inwriting,bythePrivatizationCommissionpriortosigningoftheAgreement.Similarly,thebalanceamountofRs39.779millionisconsideredtobedividenddistributionoutofthethenavailablereserveswhichwasalsonotdistributabletothepreviousmembersintermsofothercovenantsoftheAgreement.

Thecompanyhasfiledaclaimfortherecoveryoftheaforesaidaggregateamountonthegroundsthatinthepresentform,thedistributionhasbeenmadeoutoftheaccumulatedreserves,fortheyearsuptoJune30,2004,which,underthespecificprovisionsoftheAgreementwerenotdistributabletothepreviousmembersofthecompany.Incaseofapositiveoutcometothecompany’sclaim,theexcessdividendwithdrawnbythepreviousmembersofthecompanywouldberecovered.

(v) Throughashowcausenotice,thedepartmentraisedtheissueofshortpaymentofoutputsalestaxonsuppliesofthecompany’sfertilizerproduct,CalciumAmmoniumNitrate(‘CAN’)fortheperiodfromApril18,2011toDecember31,2011involvingaprincipalsalestaxdemandofRs500million.SuchissuewasraisedonthegroundsthatnotificationSRO15(I)/2006,providingforlevyofsalestaxonthebasisof‘notifiedprice’ofCAN,waswithdrawnthroughnotificationSRO313(I)/2011datedApril18,2011andhence,companywaslegallyrequiredtorecoveroutputsalestaxonsuppliesofCANonthebasisofactualconsideration receivedthereagainst.CompanyhadalreadyapproachedtheFederalBoardofRevenue(‘FBR’)ontheissueforcondonationintermsofsection65oftheSalesTaxAct,1990,whichwasnotentertained.CompanyhasassailedsuchorderthroughinstitutionofawritpetitionbeforetheLahoreHighCourtonthegroundsthatrelevantpowershavebeenexercisedinanarbitrarymannerwithoutreferringthemattertocompetentauthorityasrequiredunderthelaw.Whilesuchconstitutionalpetitionhasnotyetbeendisposed,sincemanagementconsidersthatcompany’sstanceisbasedonmeritoriousgroundsandhencereliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeinthesefinancialstatements.

(vi) Forassessmentyears1993-94and1995-96through2002-2003andfor taxyears2003through2005, thecompany, inviewofthepositiontakenbythetaxauthoritiesthattheincomeofthecompanyischargeabletotaxonthebasisof‘netincome’,hadprovidedforinthefinancialstatementsthetaxliabilityonnetincomebasiswhichaggregatedtoRs5,223.343million.Taxliabilitiesadmittedinrespectivereturnsoftotalincomeinrespectoftheseassessment/taxyears,however,aggregated toRs1,947.671millionbeing the liabilities leviableunder thePresumptiveTaxRegime(‘PTR’),consideredbythemanagementtobeapplicableinrespectofcompany’sincomefromsaleofownmanufacturedfertilizerproducts.

TheAppellateTribunal InlandRevenue(‘ATIR’)throughitsseparateordersfortheassessmentyears1993-94,1995-96through 2002-03 upheld the company’s position as taken in respective returns of total incomeand consequently,managementreversedtheexcessprovisionsaggregatingtoRs3,275.673milliononthestrengthofsuch judgments.ATIR’sdecisionsinrespectofcertainassessmentyearshavealsobeenupheldbytheLahoreHighCourtwhiledisposingdepartmentalappealsagainstrespectiveordersofATIR.IncometaxdepartmenthasstatedlyagitatedtheissuefurtherbeforeSupremeCourtofPakistan,whichispendingadjudication.

InviewofthefavorabledisposalofthematteruptothelevelofHighCourt,managementofthecompanyfeelsthatthedecisionoftheapexcourtwouldalsobeinthefavorofthecompanyandhenceinthesefinancialstatements,taxliabilitiesinrespectofabovereferredassessment/taxyearshavebeenprovidedonthebasisthatcompany’sincomeduringsuchyearswastaxableunderPTR.Incase,theapexcourtdecidesthematterotherwise,amountaggregatingtoRs3,275.673millionwillhavetoberecognizedastaxexpenseinrespectofsuchassessment/taxyears.

(vii) IncludedintradedebtsisanamountofRs18.877million(2014:Rs18.877million)whichhasnotbeenacknowledgedasdebtsbyitscustomersduetoadisputeregardingthediscountontheproduct’sprice.Thecompany’scustomershadcollectivelyfiledanappealregardingthepricedisputebeforetheCivilCourt,Multan,whichdecidedthecaseinfavorofthecompany’scustomers.ThecompanypreferredanappealbeforetheDistrictandSessionsCourt,MultanwhichsetasidetheorderoftheCivilCourt.Thecompany’scustomersfiledarevisedpetitionbeforetheLahoreHighCourtagainsttheorderoftheDistrictandSessionsCourt,whichispendingforadjudication.Basedontheadviceofthecompany’slegalcounsel,thecompany’smanagementconsidersthattherearemeritoriousgroundstodefendthecompany’sstanceandhence,noprovisionhasbeenmadeinthesefinancialstatementsonthisaccount.

(viii) Duringtheyear,throughashowcausenotice,thedepartmentraisedtheissueofnon-paymentofoutputsalestaxonstockoffertilizerproducttransferredtovariouswarehousesofthecompanyinvolvingaprincipalsalestaxdemandofRs909.125million(notincludingdefaultsurchargewhichwillbecalculatedatthetimeofdeposit)alongwithapenaltyequal to100%of theprincipal sales taxdemand.Such issuewas raisedonthegroundsthat theabovementionedtransfers constitute ‘supply’ in terms of section 2(44) of the Sales TaxAct, 1990, and hence, the samehavebeenmadewithoutpaymentofsalestax.ThemanagementhasassailedthesubjectorderinusualappellatecoursebeforeCommissionerInlandRevenue(Appeals)[‘CIR(A)’]whichispendingadjudication.Furthermore,arestraintorderdatedNovember23,2015waspassedbytheLahoreHighCourtstayingtherecoveryof thisdemandfromthecompany.Managementconsidersthattherearestronggroundstosupportthecompany’sstanceandthusnoprovisionhasbeenmadeinthesefinancialstatementsfortheabovementionedamount.

(ix) OnJuly5,2006,PakistanNationalShippingCorporation(‘PNSC’)filedarecoverysuit forUSD1.5millionagainst thecompanybeforetheCivilCourt,Lahoreclaimingthat ithadsufferedlossesasthecompanyunilaterallyterminatedtheCharterPartyAgreement(‘CPA’)betweenthePNSCandthecompany.AsperthetermsoftheCPA,PNSCwastotransport300,000metrictonsofrockphosphateforthecompanybetweenFebruary1,2005toMay31,2006atarateofUSD41permetrictonfromCasablancaporttoKarachiport.However,PNSCclaimedthatthecompanyhadunilaterallyterminatedCPAafteritsprivatizationin2005.ThecompanyalsofiledacountersuitagainstPNSCclaimingthat it had violated the termsof theCPAbydiverting ships carryingcompany’s cargo toother ports causing thecompany’scargotoarrivelaterthanexpectedresultinginlosstothecompany.TheCourtreferredthemattertothearbitratorwhothrough itsawarddatedApril22,2010decidedthematter inPNSC’s favourandconfirmed itsclaimatUSD1.3million(equivalenttoRs80.009million)andmarkupattherateof14%tobecalculatedfromthedateofawardtillthetimeofdeposit.ThecompanybeingaggrievedhasfiledanapplicationagainsttheawardofarbitratorbeforetheCivilCourt,Lahorewhichispendingadjudication.Basedontheadviceofthecompany’slegalcounsel,themanagementconsidersthatcompany’sstanceisbasedonmeritoriousgroundsandhencereliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeinthesefinancialstatements.

(x) During the year, thecompanypurchased LiquefiedNaturalGas (‘LNG’) fromPakistan StateOilCompany Limited(‘PSO’)underthevariousdirectivesofMinistryofPetroleumandNaturalResources(‘MP&NR’),GovernmentofPakistan.IncludedinthecostbookedduringtheyearrelatingtoLNGareprovisionalchargesofSuiSouthernGasCompanyLimited (‘SSGC’) and Sui NorthernGas Pipelines Limited (‘SNGPL’) (hereinafter collectively referred to as the ‘GasCompanies’) that are based on the abovementionedGovernment directives and determination ofOil andGasRegulatoryAuthority(‘OGRA’)forotherconsumersthroughitsdecisiondatedMarch18,2016.Basedontheadviceof thecompany’s legalcounsel,managementstronglybelieves that theamountsclaimedby theGasCompaniesfromthecompanywouldeventuallybein linewiththeabovebasis.Consequently,noprovisionhasbeenmadeinthesefinancialstatementsforthedifferentialamountofRs448.950millionbasedontheadviceofthecompany’slegalcounselthattherearemeritoriousgroundstofollowtheabovebasis. 58

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19.2 Commitments in respect of(i) LettersofcreditotherthanforcapitalexpenditureRs66.821million(2014:Nil).(i1) Theamountoffuturepaymentsunderoperatingleasesandtheperiodinwhichthesepaymentswillbecomedueare

as follows: 2015 2014 (Rupeesinthousand) Notlaterthanoneyear 59,854 40,258 Laterthanoneyearandnotlaterthanfiveyears 120,096 31,637 179,950 71,895

20. Property, plant and equipment Operatingfixedassets -note20.1 39,126,732 39,822,111 Capitalwork-in-progress -note20.2 11,588 12,408 Capitalstoresandstand-byequipment -note20.3 55,764 74,421 39,194,084 39,908,940

20.1 Operating fixed assets


Freehold land Buildings on Buildings on Railway Plant and Aircrafts Furniture Tools and Vehicles Catalyst Total freehold leasehold siding machinery and other land fixtures equipment

COST BalanceasatJanuary01,2014 4,767,634 2,057,264 – 36,800 28,652,792 2,783,209 70,459 721,110 206,370 217,312 39,512,950 Additionsduringtheyear – 4,853 31,400 – 29,334 7,372 122 6,516 – – 79,597 Revaluation 2,009,966 45,022 – 1,000 996,197 – – 3,110 – – 3,055,295 Transfersinfromassetssubjecttofinancelease – – – – – – – – 161,879 – 161,879 Disposalsduringtheyear – – – – – (505,796) – (60) (57,690) – (563,546) Eliminationofaccumulateddepreciation againstcostonrevaluation – (313,061) – (28,800) (1,053,736) – (23,957) (179,094) – – (1,598,648) BalanceasatDecember31,2014 6,777,600 1,794,078 31,400 9,000 28,624,587 2,284,785 46,624 551,582 310,559 217,312 40,647,527

BalanceasatJanuary01,2015 6,777,600 1,794,078 31,400 9,000 28,624,587 2,284,785 46,624 551,582 310,559 217,312 40,647,527 Additionsduringtheyear – 6,960 3,519 – – – 234 27,706 – 19,658 58,077 Disposalsduringtheyear – – – – – – – (19,123) (59,887) – (79,010) BalanceasatDecember31,2015 6,777,600 1,801,038 34,919 9,000 28,624,587 2,284,785 46,858 560,165 250,672 236,970 40,626,594

DEPRECIATION BalanceasatJanuary01,2014 – 242,137 – 22,401 996,367 768,557 18,369 148,434 189,853 74,694 2,460,812 Chargefortheyear-note20.1.3 – 107,400 262 9,475 80,283 111,620 8,306 49,617 10,883 2,483 380,329 Transfersinfromassetssubjecttofinancelease – – – – – – – – 140,676 – 140,676 Chargeondisposals – – – – – (505,796) – (49) (51,908) – (557,753) Eliminationofaccumulateddepreciation – (313,061) – (28,800) (1,053,736) - (23,957) (179,094) – – (1,598,648) BalanceasatDecember31,2014 – 36,476 262 3,076 22,914 374,381 2,718 18,908 289,504 77,177 825,416

BalanceasatJanuary01,2015 – 36,476 262 3,076 22,914 374,381 2,718 18,908 289,504 77,177 825,416 Chargefortheyear-note20.1.3 – 109,518 3,522 5,924 413,878 112,480 8,122 48,906 15,696 14,387 732,433 Chargeondisposals – – – – – – – (677) (57,310) – (57,987) BalanceasatDecember31,2015 – 145,994 3,784 9,000 436,792 486,861 10,840 67,137 247,890 91,564 1,499,862

BookvalueasatDecember31,2014 6,777,600 1,757,602 31,138 5,924 28,601,673 1,910,404 43,906 532,674 21,055 140,135 39,822,111

BookvalueasatDecember31,2015 6,777,600 1,655,044 31,135 – 28,187,795 1,797,924 36,018 493,028 2,782 145,406 39,126,732

20.1.1 Freeholdland,buildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentwererevaluedbyanindependentvaluerM/sPirsonsChemicalEngineering(Private)LimitedonAugust31,2014.Therevaluationsurplusnetofdeferredtaxwascreditedtosurplusonrevaluationofoperatingfixedassets.Hadtherebeennorevaluation,thecarryingamountsofthefollowingclassesofassetswouldhavebeenasfollows:


Freeholdland 911,940 911,940 Buildingsonfreeholdland 1,252,700 1,336,110 Plantandmachinery 15,896,051 16,185,267 Toolsandotherequipment 334,285 322,717

18,394,976 18,756,034

20.1.2 IncludedinplantandmachineryareassetshavingcarryingamountofRs47.989millionthatareinstalledatthemanufacturingfacilitiesofthecompany’scustomersnamelyIcebergGasCompany,Coca-ColaBeveragesPakistanLimitedandPepsiColaInternational(Private)Limitedastheseassetsareusedforsalestothesecustomers.


20.1.3Thedepreciationchargefortheyearhasbeenallocatedasfollows:

Costofsales -note31 528,302 181,794 Administrativeexpenses -note32 194,648 194,127 Sellinganddistributionexpenses -note33 9,483 4,408 732,433 380,329

20.1.4 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthecompanyisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate.

Thetablesbelowanalyzethenon-financialassetscarriedatfairvalueasatDecember31,2015andDecember31,2014.

Thedifferentlevelshavebeendefinedasfollows:

- Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1).

- Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices)(level2).

- Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(level3).

Thefollowingtablepresentsthecompany’snon-financialassetsthataremeasuredatfairvalueatDecember31,2015.

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Level 1 Level 2 Level 3 Total Recurring fair value measurements of certain items of operating fixed assets Freeholdland – 6,777,600 – 6,777,600 Buildingsonfreeholdland – – 1,655,044 1,655,044 Railwaysiding – – – – Plantandmachinery – – 28,187,795 28,187,795 Toolsandotherequipment – – 493,028 493,028 – 6,777,600 30,335,867 37,113,467 Thefollowingtablepresentsthecompany’snon-financialassetsthataremeasuredatfairvalueatDecember31,2014.


Level 1 Level 2 Level 3 Total Recurring fair value measurements of certain items of operating fixed assets Freeholdland – 6,777,600 – 6,777,600 Buildingsonfreeholdland – – 1,757,602 1,757,602 Railwaysiding – – 5,924 5,924 Plantandmachinery – – 28,601,673 28,601,673 Toolsandotherequipment – – 532,674 532,674 – 6,777,600 30,897,873 37,675,473

Movementsoftheabovementionedassetsandsurplusonrevaluationoftheseassetshavebeendisclosedinnote20.1andnote7respectivelytothesefinancialstatements.Thecompany’spolicyistorecognisetransfersintoandtransfersoutoffairvaluehierarchylevelsasattheendofthereportingperiod.TherewerenotransfersbetweenLevels1and2&Levels2and3duringtheyearandtherewerenochangesinvaluationtechniquesduringtheyears.

Valuation techniques used to determine level 2 and level 3 fair values

The company obtains independent valuations for its freehold land, building on freehold land, railway siding, plant andmachinery,andtoolsandequipments(classifiedasproperty,plantandequipment)atleasteverythreeyears.Attheendofeachreportingperiod,themanagementupdatesitsassessmentofthefairvalueofeachassetmentionedabove,takingintoaccount themost recent independent valuation. Themanagement determines anasset’s valuewithin a rangeofreasonablefairvalueestimates.Level2fairvalueoffreeholdlandhasbeenderivedusingasalescomparisonapproach.Salepricesofcomparablelandincloseproximityareadjustedfordifferencesinkeyattributessuchaslocationandsizeoftheproperty.Themostsignificantinputintothisvaluationapproachispricepersquarefoot.Level3fairvalueofbuildingonfreeholdlandhasbeendeterminedusingadepreciatedreplacementcostapproach,whereby,currentcostofconstructionofasimilarbuilding inasimilar locationhasbeenadjustedusingasuitabledepreciationratetoarriveatpresentmarketvalue.Level3fairvalueofrailwaysiding,plantandmachinery,andtoolsandequipmentshavebeendeterminedusingadepreciatedreplacementcostapproach,whereby,thecurrentreplacementcostofrailwaysiding,plantandmachinery,andtoolsandequipmentsofsimilarmake/origin,capacityand leveloftechnologyhasbeenadjustedusingasuitabledepreciationrateonaccountofnormalwearandtear.

Valuation inputs and relationship to fair value

Thefollowingtablesummarisesthequantitativeandqualitativeinformationaboutthesignificantunobservableinputsusedinrecurringlevel3fairvaluemeasurements.Seeparagraphaboveforthevaluationtechniquesadopted.

Fair value at

Significant Quantitative Data / Range Description Unobservable and relationship to the

2015 2014 inputs fair value

Buildingsonfreeholdland 1,655,044 1,757,602 “Costofconstruction Themarketvaluehasbeen ofanewsimilarbuilding. determinedbyusingadepreciation factorofapproximately10%-15%on Suitabledepreciationrate costofconstructingasimilarnew toarriveatdepreciated building.Higher,theestimatedcost replacementvalue.” ofconstructionofanewbuilding,

higherthefairvalue.Further,higher thedepreciationrate,thelowerthe fairvalueofthebuilding.

Railwaysiding – 5,924 “Costofacquisition Themarketvaluehasbeen ofsimilarrailwaysiding determinedbyusingcostof withsimilarlevelof acquisitionofsimilarrailwaysiding technology. withsimilarleveloftechnologyand applyingasuitabledepreciation Suitabledepreciationrate factorbasedonremaininguseful toarriveatdepreciated lifeofrailwaysiding.Remaining replacementvalue“ usefullifehasbeenestimatedto benil.Thehigherthecostof acquisitionofsimilarrailwaysiding, higherthefairvalueofrailway siding.Further,higherthe depreciationrate,thelowerthefair valueofrailwaysiding.

Plantandmachinery 28,187,795 28,601,673 “Costofacquisitionof Themarketvaluehasbeen similar plant andmachinery determinedbyusingcostof withsimilarlevelof acquisitionofsimilarplantand technology. machinerywithsimilarlevelof echnologyandapplyingasuitablet Suitabledepreciationrate depreciationfactorbasedon toarriveatdepreciated remainingusefullivesofplantand replacementvalue“ machinery.Remainingusefullives havebeenestimatedfrom20to 25years.Thehigherthecostof acquisitionofsimilarplantand machinery,higherthefairvalueof plantandmachinery.Further,higher thedepreciationrate,thelowerthe fairvalueofplantandmachinery.

Toolsandotherequipment 493,028 532,674 “Costofacquisitionof Themarketvaluehasbeen similartoolsandequipmentdeterminedbyusingcostof withsimilarlevelof acquisitionofsimilartoolsand technology. equipmentwithsimilarlevelof technologyandapplyingasuitable Suitabledepreciationrate depreciationfactorbasedon toarriveatdepreciated remainingusefullivesoftoolsand replacementvalue.” equipment.Remainingusefullives havebeenestimatedfrom4to25 years.Thehigherthecostof acquisitionofsimilartoolsand equipment,higherthefairvalueof toolsandequipment.Further,higher thedepreciationrate,thelowerthe fairvalueoftoolsandequipment.

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20.2 Capital work-in-progress

Plantandmachinery 9,468 9,320 Civilworks 295 295 Advancesagainstpurchaseofplantandmachinery-consideredgood 1,825 2,010 Others – 783

11,588 12,408

20.2.1Thereconciliationofthecarryingamountisasfollows: Openingbalance 12,408 61,718 Additionsduringtheyear 21,383 53,130

33,791 114,848 Transfersduringtheyear (22,203) (102,440)


20.3 Capital stores and stand-by equipment

Openingbalance 74,421 – Additionsduringtheyear 19,378 74,421 93,799 74,421 Transfersduringtheyear (38,035) –

Closingbalance 55,764 74,421 21. Assets subject to finance lease

Theserepresentvehiclesleasedbythecompany. COST Openingbalance – 161,879 Transfertooperatingfixedassetsduringtheyear – (161,879)

Closingbalance – –

DEPRECIATION

Openingbalance – 111,248 Chargefortheyear -note21.1 – 29,428 Transfertooperatingfixedassetsduringtheyear – (140,676)

Closingbalance – –

Closingbookvalue – –

Annualdepreciationrate% – 20

21.1 Thedepreciationchargefortheyearhasbeenallocatedasfollows:

Costofsales -note31 – 4,540 Administrativeexpenses -note32 – 13,840 Sellinganddistributionexpenses -note33 – 11,048

– 29,428

(Rupees in thousand) Computer Mining rights Total software22. Intangible assets COST BalanceasatJanuary01,2014 33,586 210,000 243,586 Additionsduringtheyear 10,654 – 10,654 BalanceasatDecember31,2014 44,240 210,000 254,240 BalanceasatJanuary01,2015 44,240 210,000 254,240 Additionsduringtheyear 607 – 607 BalanceasatDecember31,2015 44,847 210,000 254,847

AMORTIZATION BalanceasatJanuary01,2014 8,179 91,000 99,179 Chargefortheyear -note22.2 8,662 21,000 29,662 BalanceasatDecember31,2014 16,841 112,000 128,841

BalanceasatJanuary01,2015 16,841 112,000 128,841 Chargefortheyear -note22.2 10,717 21,000 31,717 BalanceasatDecember31,2015 27,558 133,000 160,558

BookvalueasatDecember31,2014 27,399 98,000 125,399

BookvalueasatDecember31,2015 17,289 77,000 94,289

Annualamortizationrate% 25 10

22.1 MiningrightsrepresentrightsacquiredforextractionofrockphosphatefromablockofareainDistrictAbbottabadforatenyearsperiodendingonAugust11,2019.TheaforesaidareaisinthepossessionandcontrolofPakistanMiningCompanyLimited(‘PMCL’),arelatedparty(associatedcompany),whichprovidesrockphosphateextractionservicestothecompanyaspertheServicesAgreement.


22.2 Theamortizationchargefortheyearhasbeenallocatedasfollows: Costofsales(includedinrawmaterialsconsumed) 21,000 21,000 Administrativeexpenses -note32 10,717 8,662

31,717 29,662

23. Goodwill

ThisrepresentsgoodwillonamalgamationofRELandthecompany.

Impairmenttestingofgoodwillhasbeencarriedoutbyallocatingtheamountofgoodwilltorespectiveassetsonwhichitarose.TherecoverableamountoftheCashGeneratingUnithasbeendeterminedbasedonavalueinusecalculation.Thiscalculationusescashflowprojectionsbasedonfinancialbudgetsapprovedbymanagementcoveringafive-yearperiodthathavebeendiscountedusingadiscountrateof14.21%.Thecashflowsbeyondthefive-yearperiodareextrapolatedusinganestimatedgrowthrateof4%whichisconsistentwiththelong-termaveragegrowthrateforthefertilizerindustry.TherecoverableamountcalculatedbasedonvalueinuseexceededcarryingvaluebyRs23,841million.Alongterm/terminalgrowthrateof-5.50%orariseindiscountrateto21.13%would,allchangestakeninisolation,resultintherecoverableamountbeingequaltothecarryingamount.

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Theabovecashflowprojectionsareprincipallybasedontheassumptionthatgassupplywouldcontinuetothecompany.Duringthepreviousthreeyears,thecompanyhasfacedgasshortagesthatresultedinlosses.However,duringthecurrentyear,thecompanystartedpurchasingRegasifiedLiquefiedNaturalGas(‘RLNG’)fromPSOduetowhichitsplantoperatedfor273days resulting inprofit for thecurrentyear.PSOhad importedsuchLiquefiedNaturalGas(‘LNG’) fromQatargas.Management’sassumptionofcontinuity ingas supply to thecompany’splant isbasedon the long termagreement forimportofLNGsignedbetweentheGovernmentofPakistanandQatargas.


24. Long term investments

Subsidiary - unquoted - available for sale (not intended to be sold within next twelve months):

RelianceSacksLimited(incorporatedinPakistan) 16,863,273(2014:16,863,273)fully paidordinarysharesofRs10each Equityheld100%(2014:100%) BookvaluepershareRs26.949(2014:Rs18.412) -note24.1 297,120 258,177

Associate - unquoted - at cost:

MultanRealEstateCompany(Private)Limited 642,321(2014:642,321)fully paidordinarysharesofRs100each Equityheld29.55%(2014:29.55%) BookvaluepershareRs100.04(2014:Rs99.83) -note24.2 64,232 64,232 Held to maturity (not due to mature within next twelve months):

-Other -note24.3 43,278 38,589

404,630 360,998

24.1 Investment in Reliance Sacks Limited - at fair value

Atcost 168,633 168,633 Cumulativefairvaluegainrecognised 128,487 89,544

-note24.1.1 297,120 258,177

This represents investment in the ordinary shares of RSL which is principally engaged in themanufacturing and sale ofpolypropylenesacks,polypropyleneclothandlinerstobeusedinpackingoffertilizers.SinceRSL’sordinarysharesarenotlisted,an investmentadvisor engagedby thecompanyhasestimateda fair valueof Rs 17.62perordinary shareasatDecember31,2015throughavaluationtechniquebasedondiscountedcashflowanalysisofRSL,hence,hasbeenclassifiedunderlevel3offairvaluehierarchyasfurtherexplainedinnote44.2tothesefinancialstatements.

Themainlevel3inputsusedbythecompanyarederivedandevaluatedasfollows:

-Discount rate isdeterminedusingacapitalassetpricingmodel tocalculateapre-tax ratethat reflectscurrentmarketassessmentsofthetimevalueofmoneyandtheriskspecifictoRSL.

-EarninggrowthfactorisestimatedbasedonhistoricalperformanceofRSLandcurrentmarketinformationforsimilartype

ofcompanies.

Thesignificantassumptionusedinthisvaluationtechniqueareasfollows:

-Discountrate19.80%perannum.

-Earninggrowthfactor2%perannum. Sensitivity analysis

Sensitivityanalysisofthesignificantassumptionusedinthevaluationtechniqueareasfollows:

Ifthediscountrateincreasesby1%withallothervariablesheldconstant,theimpactonfairvalueasatDecember31,2015wouldbeRs30.483millionlower.

Iftheearninggrowthfactordecreasesby1%withallothervariablesheldconstant,theimpactonfairvalueasatDecember31,2015wouldbeRs15.579millionlower.


24.1.1Thereconciliationofthecarryingamountisasfollows:

Openingbalance 258,177 196,137 Surplus on remeasurement of fair value ofavailable-for-saleinvestmentrecognized asothercomprehensiveincome 38,943 62,040


24.2 Associate - unquoted - at cost

ThisrepresentsinvestmentintheordinarysharesofMultanRealEstateCompany(Private)Limited(‘MREC’).ThemainbusinessofMRECisestablishinganddesigninghousingandcommercialschemes,tocarryonbusinessofcivilengineersforconstructionofprivateandgovernmentalbuildingsandinfrastructureandprovisionoflaborandbuildingmaterial.

24.3 Investment - Other

ThisrepresentsDefenceSavingCertificatesissuedforaperiodoftenyears,whichwillmatureonSeptember11,2019.Yieldtomaturityonthesecertificatesis12.15%.ThesecertificateshavebeenpledgedassecuritywiththeDirectorGeneral,Mines&Minerals,GovernmentofKhyberPakhtunkhwaasperthetermsoftheminingagreement.


25. Stores and spare parts

Chemicalsandcatalysts -note25.1 845,155 890,927 Stores 114,625 121,376 Spareparts[includingintransitRs37.598million (2014:Rs23.112million)] 1,677,407 1,694,948

2,637,187 2,707,251 Provisionforobsoleteitems (76,224) (76,224)

2,560,963 2,631,027

25.1 Includedinchemicalsandcatalystsisplatinum,rhodiumandpalladiumofRs80.327million(2014:Rs57.042million)heldbyJohnsonMattheyPublicLimitedCompany,UnitedKingdomonbehalfofthecompanyforrefiningpurposes.

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26. Stock-in-trade Rawmaterials -note26.2 539,316 426,502 Packingmaterials 40,044 37,508 Midproducts 154,189 19,709 Finishedgoods: -Ownmanufactured: Fertilizers -note26.3 4,733,699 8,909 Emissionreductions -note26.4 – 317 4,733,699 9,226 -Fertilizerpurchasedforresale 2,193,497 336,387

7,660,745 829,332

26.1 RawmaterialsandfinishedgoodsamountingtoRs4,521.267million(2014:Rs423.610million)arepledgedwith lendersassecurityagainstshorttermborrowingsasreferredtoinnote15.1.

26.2 IncludesrockphosphateamountingtoRs64.396million(2014:Rs52.546million)whichisinthepossessionofPMCL(relatedparty-associatedcompany).TherockphosphateinpossessionofPMCLisduetothereasonexplainedinnote22.1tothesefinancialstatements.

26.3 Includescompany’sfertilizerproduct,NitroPhosphate(‘NP’),amountingtoRs5.748million(2014:Nil)whichisinpossessionofFATIMA,arelatedparty(associatedcompany),forstoragepurposeasthetwocompaniessharestoragespaceincertainareas.

26.4 This representsemission reductionscostingRs 37.137million (2014: Rs 37.137million)carriedat theirNetRealizableValue(‘NRV’)amountingtoNil(2014:Rs0.317million).TheNRVwritedownexpenseofRs0.317million(2014:Rs36.820million)hasbeenchargedtocostofsales.


27. Trade debts

Consideredgood: -Secured(bywayofbankguaranteesandsecuritydeposits) -note27.1 2,507,978 85,878 -Unsecured 116,222 101,936

2,624,200 187,814

27.1Theseareinthenormalcourseofbusinessandcertaindebtscarryinterestrangingfrom9.02%to12.52%perannum.


28. Advances, deposits, prepayments and other receivables Advances - considered good:

-Toemployees -note28.1 11,022 11,740 -Tosuppliers -note28.2 1,707,632 80,742 Tradedeposits – 100 Prepayments 163,712 5,986 Interestreceivableonbankdeposits 992 1,702 Balanceswithstatutoryauthorities: -Salestax -consideredgood -note28.5 2,206,858 – -considereddoubtful 8,911 8,911 2,215,769 8,911 -Incometaxrecoverable 3,765,575 3,100,861 -Customdutyrecoverable 9,812 9,812 Lettersofcredit-margins,deposits,openingchargesetc. 248 – Securitydeposits -note28.3 18,157 637,995 ReceivablefromGovernmentofPakistan -note28.4 1,302,429 – Otherreceivables-consideredgood 103,917 81,110 9,299,265 3,938,959 Provisionfordoubtfulreceivable (8,911) (8,911)

9,290,354 3,930,048 28.1 IncludedinadvancestoemployeesareamountsduefromexecutivesofRs7.503million(2014:Rs7.845million).

28.2 IncludesanamountofRs26.741million(2014:Rs27.684million)andRs5.895million(2014:Nil)asadvancestorelatedparties,PMCL(associatedcompany)andSNGPL(associatedcompany)respectively.

28.3 IncludesanamountofNil(2014:Rs630million)depositedwithSindhHighCourt,inrespectofsuitfiledbythecompanyinrelationtoproposedacquisitionofDHFertilizersLimited(‘DHFL’,nowFatimafertLimited).

DuringtheyearendedDecember31,2012,thecompanysignedaMemorandumofUnderstanding(MoU)withDawoodHerculesCorporationLimited(‘DHCorp’)forthepurchaseofitsentireshareholding(100millionordinarysharesofRs10each)initswhollyownedsubsidiary,DHFL.However,theBoardofDirectorsofDHCorpintheirmeetingheldonDecember10,2012decidedthat itdidnot intendtopursue the transaction forcommercial reasons.Subsequently, thecompanyfiledasuitagainstDHCorpinSindhHighCourt(the‘Court’)fortheenforcementofthesaidMoU.

Duringtheyear,thecompanyandDHCorpreachedanoutofcourtsettlementforthesaidsuitwherebyDHCorpagreedtofulfilitsobligationaspertheMoUbysellingitsentireshareholdinginDHFLtothecompany.Consequently,thecompanyfiledanapplicationfordismissaloftheaforesaidsuitwhichwasdulyacceptedbytheCourtvideitsorderdatedJune18,2015andthecompleteamountofdepositwasrefundedtothecompany.Furthermore,asperthesettlement,thecompanyandDHCorpenteredintoa‘SharePurchaseAgreement’foracquisitionofentireshareholdingofDHFLonJune15,2015.However,owingtothecompany’sfinancialposition,itsBoardofDirectorsassignedtheacquisitionrights,benefitsandobligationsundertheSharePurchaseAgreementtoFATIMA,arelatedparty(associatedcompany).

28.4 During the year, theGovernmentof Pakistannotified thepaymentof subsidyat the rateof Rs 500per 50 kgbagofDiAmmoniumPhosphate(‘DAP’)andRs217per50kgbagofNPsold.TheamountofsubsidywillbepaidtothecompanyuponverificationbytheFederalBoardofRevenue.

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28.5 IncludesRs134.022millionwhichprimarilyrepresentstheinputsalestaxpaidbythecompanyinrespectofrawmaterialsacquiredbeforeJune11,2008onwhichdatefertilizerproductsmanufacturedbythecompanywereexemptedfromlevyofsalestaxthroughnotificationSRO535(I)/2008.Theamountstoodrefundabletothecompanytherebeingnooutputsalestaxliabilityremainingpayableonfertilizerproductsmanufacturedbythecompanyagainstwhichsuchinputsalestaxwasadjustable.Thecompany’sclaimofrefundonthisaccountwasnotentertainedbyFederalBoardofRevenue(‘FBR’)onthepremisethatsincesubjectrawmaterialsweresubsequentlyconsumedinmanufactureofaproductexemptfromlevyofsalestax,claimwasnotinaccordancewiththerelevantprovisionsoftheSalesTaxAct,1990.

Company’smanagementbeingaggrievedwiththeinterpretationadvancedbyFBRontheissuehaspreferredawritpetitionbeforetheLahoreHighCourt,whichhasnotyetbeendisposedoff.Sincecompany’smanagementconsidersthatclaimofrefundiscompletelyinaccordancewithrelevantstatutoryframeworkandexpectsrelieffromappellateauthoritiesonthisaccount,itconsidersthatthereceivableamountwasunimpairedatthebalancesheetdate.


29. Cash and bank balances

Atbankson: -Savingaccounts -notes29.1&29.2 382,090 1,314,132 -Currentaccounts -note29.2 130,399 94,178

512,489 1,408,310 Inhand 4,969 5,145

517,458 1,413,455

29.1 Profitonbalancesinsavingaccountsrangesfrom4%to9%perannum.

29.2 IncludedinsavingaccountsisanamountofRs217.379million(2014:Rs274.314million)whichbearsmarkupattherateof5.75%perannumandincludedincurrentaccountsisanamountofRs2.698million(2014:Rs3.019million),bothplacedwithSummitBankLimited,arelatedparty(associatedcompany).


30. Sales Fertilizerproducts: -Ownmanufactured 16,193,646 5,790,966 -Purchasedforresale 6,307,780 10,794,959

22,501,426 16,585,925

SubsidyfromGovernmentofPakistan -note28.4 1,302,429 – Midproducts 542,280 287,264 Rockphosphate 40,107 85,695

1,884,816 372,959

24,386,242 16,958,884 Less: Salestax 2,081,415 2,523,392 Salesincentive 384,332 187,382 2,465,747 2,710,774

21,920,495 14,248,110


31. Cost of sales Rawmaterialconsumed -notes31.1&31.2 11,898,039 1,901,383 Packingmaterialconsumed 339,559 75,845

12,237,598 1,977,228 Salaries,wagesandotherbenefits -note31.3 638,150 475,852 Fuelandpower -notes31.4 2,461,501 710,373 Chemicalsandcatalystsconsumed 408,497 7,950 Sparepartsconsumed 151,981 100,621 Storesconsumed 45,723 20,707 Repairsandmaintenance 73,713 141,524 Insurance 128,412 154,920 Depreciationonoperatingfixedassets -note20.1.3 528,302 181,794 Depreciationonassetssubjecttofinancelease -note21.1 – 4,540 Tollmanufacturingchargesandfreight -note31.5 723,838 978,864 Others -note31.6 40,310 29,635

17,438,025 4,784,008 Openingstockofmidproducts 19,709 40,519 Closingstockofmidproducts (180,135) (19,709)

(160,426) 20,810

Costofgoodsmanufactured 17,277,599 4,804,818 Openingstockoffinishedgoods 9,226 20,391 Closingstockoffinishedgoods (4,707,754) (9,226)

(4,698,528) 11,165 Costofgoodssold-ownmanufactured 12,579,071 4,815,983 Costofgoodssold-purchasedforresale 4,773,728 7,448,261

17,352,799 12,264,244

31.1 IncludesfeedgasconsumedofNil(2014:Rs745.024million)purchasedfromSNGPL,arelatedparty(associatedcompany).

31.2 IncludesexpensesofRs43.459million(2014:Rs81.529million) forextractionof rockphosphatebyPMCL,a relatedparty(associatedcompany),asexplainedinnote22.1tothesefinancialstatements.


31.3 Salaries, wages and other benefits Salaries,wagesandotherbenefitsincludethefollowingin respectofretirementbenefits:

Gratuity Currentservicecost 15,792 15,969 Interestcostfortheyear 7,425 7,560 Expectedreturnonplanassets (6,492) (6,274)

16,725 17,255

Accumulating compensated absences Currentservicecost 8,059 2,487 Interestcostfortheyear 4,052 1,207 Remeasurements 524 (2,868)

12,635 826

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Inadditiontotheabove,salaries,wagesandotherbenefitsincludeRs13.215million(2014:Rs12.332million)inrespectofprovidentfundcontributionbythecompany.

31.4 IncludesfuelgasconsumedofRs46.907million(2014:Rs644.746million)purchasedfromSNGPL,arelatedparty(associatedcompany).

31.5ThisincludesprocessingservicesofRs658.842million(2014:Rs976.416million)availedfromFATIMA,arelatedparty(associatedcompany).

31.6IncludesoperatingleaserentalsamountingtoRs15.224million(2014:Rs13.671million).


32. Administrative expenses

Salaries,wagesandotherbenefits -note32.1 301,435 201,411 Travellingandconveyance 15,546 13,205 Telephone,telexandpostage 14,521 14,024 Stationery,printingandperiodicals 5,194 7,763 Rent,ratesandtaxes -note32.2 59,738 38,747 Repairsandmaintenance 50,130 28,768 Aircraftoperatingexpenses -note32.3 123,161 111,764 Insurance 13,540 17,950 Legalandprofessionalcharges 23,126 13,956 Vehiclerunningexpenses 2,785 1,644 Entertainment 7,765 3,435 Advertisement 352 462 Depreciationonoperatingfixedassets -note20.1.3 194,648 194,127 Depreciationonassetssubjecttofinancelease -note21.1 – 13,840 Amortizationonintangibleassets -note22.2 10,717 8,662 Other 56,739 60,932

-note32.4 879,397 730,690

32.1 Salaries, wages and other benefits

Salaries,wagesandotherbenefitsincludethe followinginrespectofretirementbenefits: Gratuity Currentservicecost 5,325 5,466 Interestcostfortheyear 2,503 2,589 Expectedreturnonplanassets (2,189) (2,148) Amountchargedtorelatedparty (1,108) (1,055) 4,531 4,852 Accumulatingcompensatedabsences Currentservicecost 3,060 1,338 Interestcostfortheyear 1,539 649 Remeasurements 199 (1,544) 4,798 443

Inaddition to theabove, salaries,wagesandotherbenefits includeRs5.302million (2014:Rs5.222million) in respectofprovidentfundcontributionbythecompany.

32.2 IncludesoperatingleaserentalsamountingtoRs19.289million(2014:Rs18.563million).

32.3 IncludesexpensesofRs35.120million(2014:Rs31.090million)forflyingandmaintenanceservicesofthecompany’saircraftbyAirOne(Private)Limited,arelatedparty(associatedcompany)aspertheServicesAgreement.

32.4 IncludesamountofRs187.733million(2014:Rs103.959million)whichrepresentscommoncostschargedtothecompanybyFATIMA,a relatedparty (associatedcompany)asper theExpenseSharingAgreement.Also, theamount isnetofRs81.111million(2014:Rs74.205million)whichrepresentscommoncostschargedbythecompanytoFATIMA,arelatedparty(associatedcompany)aspertheExpenseSharingAgreement.


33. Selling and distribution expenses

Salaries,wagesandotherbenefits -note33.1 117,712 14,428 Travellingandconveyance 9,655 1,491 Telephone,telexandpostage 6,772 750 Stationery,printingandperiodicals 1,745 184 Rent,ratesandtaxes -note33.2 40,662 3,273 Repairsandmaintenance 5,007 995 Insurance 3,153 846 Vehiclerunningexpenses 7,436 1,985 Entertainment 3,966 523 Advertisementandsalepromotion 148,982 15,566 Depreciationonoperatingfixedassets -note20.1.3 9,483 4,408 Depreciationonassetssubjecttofinancelease -note21.1 – 11,048 Transportationandfreight 533,238 630,288 Utilities 1,066 236 Technicalservices – 93 Others 7,665 126

-note33.3 896,542 686,240


Salaries,wagesandotherbenefitsincludethe followinginrespectofretirementbenefits:

Gratuity Currentservicecost 9,981 9,744 Interestcostfortheyear 4,692 4,613 Expectedreturnonplanassets (4,103) (3,830) Amountchargedtorelatedparty (7,196) (8,185)

3,374 2,342


7,605 2,656

Inaddition to theabove, salaries,wagesandotherbenefits includeRs9.901million (2014:Rs8.815million) in respectofprovidentfundcontributionbythecompany.

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33.3 IncludesamountofRs137.458million (2014:Rs23.308million)which representscommoncostscharged to thecompanybyFATIMA,a relatedparty (associatedcompany)asper theExpenseSharingAgreement.Also, theamount isnetofRs437.373million(2014:Rs378.513million)whichrepresentscommoncostschargedbythecompanytoFATIMA,arelatedparty(associatedcompany)aspertheExpenseSharingAgreement.


34. Finance cost

Interest/markupon: -PPTFCs-secured – 115,223 -Financeleases – 740 -Shorttermborrowings-secured -note34.1 839,871 567,914 -Longtermloanfromrelatedparties-unsecured -note34.2 143,592 – -Longtermloans-secured 176,732 255,986 -Syndicatedtermfinance-secured – 12,775 -Shorttermborrowingfromrelatedparty-secured -note34.3 296,779 368,384 Loanarrangementfeesandothercharges 605 4,551 Commissiononletterofcredit 137,090 141,471 Amortisationoftransactioncost -note8.2.7 482 – Bankcharges 81,837 26,640 LatepaymentsurchargeonunpaidGIDC – 132,159

1,676,988 1,625,843

34.1 IncludesinterestexpenseofRs36.916million(2014:Rs45.864million)onaccountofrunningfinancefacilityavailedfromarelatedparty,SummitBankLimited(associatedcompany).


34.2 This relates to the following related parties:

FatimaHoldingsLimited(associatedcompany) 15,931 – RelianceCommodities(Private)Limited(associatedcompany) 41,057 – MemberandChairman’sspouse 33,402 – Chairman’schildren 5,067 – Directors 48,135 –

143,592 –

34.3 ThisrelatestoFATIMA,relatedparty(associatedcompany).


35. Other expenses

Donations -note35.1 20,947 1,431 Advanceswrittenoff 2,218 – Exchangeloss 227,441 – Workers’profitparticipationfund -note17.5 59,843 – Workers’welfarefund 22,740 –

333,189 1,431

35.1 IncludesanamountofRs20.947million(2014:Nil)donatedtoarelatedparty,MukhtarA.SheikhTrust(associatedundertaking).


36. Other income

Income from financial assets: Incomeonbankdeposits -note36.1 61,589 24,445 Unrealisedgainoninvestmentheldtomaturity 4,689 4,181 Mark-uponcreditsaleoffertilizers 1,517 10,392 Exchangegain – 72,798

67,795 111,816 Income from non-financial assets: Rentalincome -note36.2 17,486 24,141 Profitondisposalofoperatingfixedassets 5,579 367,234 Scrapsalesandsundryincome -note36.3 24,517 32,460 Gainonrecoveryofchemicalcatalysts – 200,607 Provisionsandunclaimedbalanceswrittenback -note36.4 148,465 21,154 Incomefrombiologicallaboratory 4,636 4,055 Profitondisposalofchemicalcatalysts – 165,320 Excessinsurancepremiumrefunded 64,205 108,940 264,888 923,911

332,683 1,035,727

36.1 IncludesinterestincomeofRs7.360million(2014:Rs16.328million)onaccountofsavingaccountwithSummitBankLimited,arelatedparty(associatedcompany).

36.2 Includesrentalincomeforvehiclesinuseofandaccomodationprovidedtotheemployeesofthefollowingrelatedparties(associatedcompanies):


FATIMA 64 10,341 FatimaEnergyLimited 996 – RelianceWeavingMillsLimited 3,452 –

4,512 10,341

36.3 IncludesanamountofRs1.084million(2014:Nil)inrespectofscrapsalestoFATIMA.

36.4 IncludesanamountofRs132.159million(2014:Nil) inrespectof latepaymentsurchargeonGIDCpayable,writtenbackduringtheyearrelatingtotheperiodbeforetheenactmentofGIDCAct,2015.

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37. Taxation

Current tax -Fortheyear 206,336 147,588 -Prioryears 21,215 – 227,551 147,588 Deferredtax -note13 (1,573,000) (127,538)

(1,345,449) 20,050

37.1 Asexplainedinnote4.1,thecompany’sprovisionfortaxation(currentanddeferred)isbasedontheconsolidatedresultsoftheGroup. 2015 2014

%age %age

37.2 Tax charge reconciliation Numericalreconciliationbetweentheaverageeffectivetaxrate andtheapplicabletaxrate Applicabletaxrate 32.00 33.00 Taxeffectofamountsthatare: Notdeductiblefortaxpurposes 3.18 (40.46) Incomeexemptfromtax (37.39) – Allowableastaxcredit – 11.92 WithinGrouptaxationasexplainedinnote4.1 1.86 (55.61) Effectofchangeintaxrate (75.49) 1.00 Effectofchangeinprioryears’tax (44.91) (31.32)

(152.75) (114.47)

Averageeffectivetaxrate (120.75) (81.47)


38. Cash (used in)/generated from operations Profit/(loss)beforetaxation 1,114,263 (24,611) Adjustmentsfornon-cashchargesandotheritems: -Depreciationonoperatingfixedassets 732,433 380,329 -Depreciationonleasedassets – 29,428 -Advanceswrittenoff 2,218 – -Amortizationonintangibleassets 31,717 29,662 -Retirementbenefitsaccrued 57,972 37,614 -Profitondisposalofoperatingfixedassets (5,579) (367,234) -Provisionsandunclaimedbalanceswrittenback (148,465) (21,154) -Financecost 1,676,988 1,625,843 -Incomeonbankdeposits (61,589) (24,445) -Unrealisedgainoninvestmentheldtomaturity (4,689) (4,181) -Exchangeloss/(gain) 227,440 (72,798) -Gainonrecoveryofchemicalcatalysts – (200,607)

Profitbeforeworkingcapitalchanges 3,622,709 1,387,846

Effectoncashflowduetoworkingcapitalchanges -Decreaseinstoresandspareparts 70,064 411,698 -Increaseinstock-in-trade (6,947,585) (17,673) -Increaseintradedebts (2,436,386) (34,651) -Increaseinadvances,deposits prepaymentsandotherreceivables (4,698,520) (555,664) -Increaseintradeandotherpayables 2,266,837 3,729,233 (11,745,590) 3,532,943 (8,122,881) 4,920,789


39. Cash and cash equivalents Shorttermborrowings -note15 (15,151,614) (4,637,446) Cashandbankbalances -note29 517,458 1,413,455 (14,634,156) (3,223,991)

40. Transactions with related parties

The relatedpartiescomprise subsidiary,associatedundertakings,other relatedparties, keymanagementpersonnelandpostemploymentbenefitplans.Thecompanyinthenormalcourseofbusinesscarriesouttransactionswithvariousrelatedparties.Amountsduefromandduetorelatedpartiesareshownunderreceivablesandpayablesandremunerationofthekeymanagementpersonnelisdisclosedinnote41.Significantrelatedpartytransactionshavebeendisclosedinrespectivenotesinthesefinancialstatementsexceptforthefollowing:


Relationship with the company Nature of transactions

i.Subsidiary Purchaseofgoods 457,094 204,480 ii.Associatedundertakings Saleofgoodsandservices – 170,321 Purchaseofgoods 88,986 13,247 iii.Postemploymentbenefitplans Expensechargedinrespectof 61,335 60,058 retirementbenefitplans

41. Remuneration of Chief Executive, Directors and Executives

41.1 Theaggregateamountchargedinthefinancialstatementsfortheyearforremuneration,includingcertainbenefits,totheChiefExecutive,DirectorsandExecutivesofthecompanyisasfollows:

ChiefExecutive ExecutiveDirectors Non-ExecutiveDirectors Executives

2015 2014 2015 2014 2015 2014 2015 2014 (Rupeesinthousand)

Short term employee benefits

Managerialremuneration – – – – 5,673 6,000 320,673 283,252 Housingrent – – – – – – 109,327 97,177 Utilities – – – – – – 24,295 21,595 Conveyance – – – – – 240 24,295 21,595 Medicalexpenses – – – – 567 – 9,868 16,428 Leavepassage – – – – 945 1,000 38,169 35,031 Others – – – – – – 15,875 7,320

– – – – 7,185 7,240 542,502 482,398 Post employment benefits

Contributiontoprovidentand gratuityfunds – – – – – – 42,155 36,985

Other long term benefits

Accumulatingcompensatedabsences – – – – – – 44,358 37,286

– – – – 7,185 7,240 629,015 556,669

Number of persons 1 1 1 1 6 6 231 208

41.2 Thecompanyalsoprovidesthechiefexecutive,directorsandsomeofitsexecutiveswithcompanymaintainedcars,travelfacilitiesandclubmembership.

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2015 2014

42. Capacity and production

Urea Ratedproductioncapacity M.Tons 92,400 92,400 Actualureaproduced M.Tons – 6,789

NilproductionofUREAisattributabletohighcostofproductionascomapredtootherfertilizerproductsofthecompany.ThecompanyintendstoresumeproductionofUREAnextyearasitexpectsthatthepriceofRLNGwilldecreaseinfuture.

Nitro Phosphate (NP)

Ratedproductioncapacity M.Tons 304,500 304,500 ActualNPproduced M.Tons 265,349 44,684

ThelowproductionofNPisduetoshortageoffeedgasandperiodicalmaintenance.

Calcium Ammonium Nitrate (CAN)

Ratedproductioncapacity M.Tons 450,000 450,000 ActualCANproduced M.Tons 287,954 55,432 ThelowproductionofCANisduetoshortageoffeedgasandperiodicalmaintenance.

43. Disclosures relating to Provident Fund

Thecompanyoperatestwoprovidentfunds:

(i) Employees’ProvidentFundTrustLahore(ii) Employees’ProvidentFundTrustMultan

ThefollowinginformationisbasedontheauditedfinancialstatementsoftheFundsasatJune30,2015and2014:


SizeoftheFunds-totalassets 350,297 315,758 Costofinvestmentsmade 270,528 225,735 Percentageofinvestmentsmade 86% 79% Fairvalueofinvestments 300,566 249,102

Break up of investments

Specialaccountsinascheduledbank 199,028 207,735 Mutualfunds-listed 101,539 41,367

2015 2014 %ageofsizeoftheFund

Break up of investments

Specialaccountsinascheduledbank 57% 66% Mutualfunds-listed 29% 13% InvestmentsoutofProvidentFundshavebeenmadeinaccordancewiththeprovisionsofsection227oftheCompanies

Ordinance,1984andtherulesformulatedforthispurpose.

44. Financial risk management

44.1 Financial risk factors Thecompanyisexposedtoavarietyoffinancialrisks:marketrisk(includingcurrencyrisk,otherpriceriskandinterestraterisk),

creditriskandliquidityrisk.Thecompany’soverallriskmanagementprogrammefocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsonthefinancialperformance.

Riskmanagement iscarriedoutby thecompany’sBoardofDirectors (‘theBoard’). Thecompany’sfinancedepartmentevaluatesandhedgesfinancial risks.TheBoardprovideswrittenprinciplesforoverall riskmanagement,aswellaswrittenpolicies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financialinstrumentsandnon-derivativefinancialinstruments,andinvestmentofexcessliquidity.

Thecompany’soverallriskmanagementprocedurestominimizepotentialadverseeffectoffinancialmarketoncompanyare as follows:

a) Market risk

i) Currency risk

Currencyriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinforeignexchangerates.Currencyriskarisesmainlyfromfuturecommercialtransactionsorreceivablesandpayablesthatexistduetotransactionsinforeigncurrencies.

Thecompanyisexposedtocurrencyriskarisingfromvariouscurrencyexposures,primarilywithrespecttotheUnitedStatesDollar(USD)andEuro.Currently,thecompany’sforeignexchangeriskexposureisrestrictedtobankbalancesandamountsreceivablefrom/payabletotheforeignentities.

2015 2014

Amountpayable-USD 19,596,344 42,557,215 Cashandbankbalances-USD (11,627) (151,586) Netliabilityexposure-USD 19,584,717 42,405,629

Cashandbankbalances-Euro (5,095) (364,906) Netassetexposure-Euro (5,095) (364,906)

AtDecember31,2015iftheRupeehadweakened/strengthenedby5%againsttheUSDwithallothervariablesheldconstant,theimpactonpretaxprofitfortheyearwouldhavebeenRs100.863million(2014:Rs214.572million)lower/higher,mainlyasaresultofexchangelosses/gainsontranslationofUSDdenominatedfinancialinstruments.

At December 31, 2015 if the Rupee hadweakened/strengthened by 5% against the Euro with all other variables held

constant,theimpactonpretaxprofitfortheyearwouldhavebeenNil(2014:Rs2.456million)higher/lower,mainlyasaresultofexchangegains/lossesontranslationofEurodenominatedfinancialinstruments.

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ii) Other price risk

Otherpriceriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketprices(otherthanthosearisingfrominterestrateriskorcurrencyrisk),whetherthosechangesarecausedbyfactorsspecifictotheindividualfinancialinstrumentoritsissuer,orfactorsaffectingallsimilarfinancialinstrumentstradedinthemarket.Thecompanyisnotmateriallyexposedtoequitypricerisksincetherearenosignificantinvestmentsinequityinstrumentstradedinthemarketeitherclassifiedasavailable-for-saleoratfairvaluethroughprofitorlossatthereportingdate.Thecompany isalsonotexposedtocommoditypricerisksince itdoesnotholdanyfinancial instrumentbasedoncommodityprices.

iii) Interest rate risk

Interestrateriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.

Thecompany’sinterestrateriskarisesfromlongtermfinances/loansandshorttermborrowings.Borrowingsobtainedandloansprovidedatvariableratesexposethecompanytocashflowinterestraterisk.

Atthebalancesheetdate,theinterestrateprofileofthecompany’ssignificantinterestbearingfinancialinstrumentswas:


Fixed rate instruments: Financial assets Investment 43,278 38,589 Tradedebts 2,510,370 121,369 Bankbalances-savingaccounts 382,090 1,314,132 2,935,738 1,474,090

Financial liabilities – – Net exposure 2,935,738 1,474,090

Floating rate instruments: Financial assets – – Financial liabilities

Longtermloansfromrelatedparties 2,232,952 825,968 Longtermfinances 3,042,161 1,966,071 Shorttermborrowingfromrelatedparty 2,200,000 3,000,000 Shorttermborrowings 15,151,614 4,637,446 22,626,727 10,429,485 Netexposure (22,626,727) (10,429,485)

Fair value sensitivity analysis for fixed rate instruments

Thecompanydoesnotaccountforanyfixedratefinancialassetsandliabilitiesatfairvaluethroughprofitorloss.Therefore,achangeininterestrateatthebalancesheetdatewouldnotaffectprofitorlossofthecompany.

Cash flow sensitivity analysis for variable rate instruments

If interest ratesonvariable rate financial instruments,at the yearenddate, fluctuatesby 1%higher/lowerwithall othervariablesheldconstant,pretaxprofitfortheyearwouldhavebeenRs226.306million(2014:Rs96.035million)lower/higher,mainlyasaresultofhigher/lowerinterestexpenseonfloatingrateinstruments.

b) Credit risk

Creditriskrepresentstheriskoffinanciallossbeingcausedifcounterpartyfailstodischargeanobligation.

Creditriskofthecompanyarisesfromcashandcashequivalentsanddepositswithbanksandfinancialinstitutions,aswellascreditexposurestocustomers,includingoutstandingreceivablesandcommittedtransactions.Themanagementassessesthecreditqualityofthecustomers,takingintoaccounttheirfinancialposition,pastexperienceandotherfactors.IndividualrisklimitsaresetbasedoninternalorexternalratingsinaccordancewithlimitssetbytheBoard.Theutilisationofcreditlimitsisregularlymonitoredandmajorsalestocustomersaresettledincash.Forbanksandfinancialinstitutions,onlyindependentlyratedpartieswithastrongcreditratingareaccepted.

Thecompanymonitorsthecreditqualityofitsfinancialassetswithreferencetohistoricalperformanceofsuchassetsandavailableexternalcreditratings.Thecarryingvaluesoffinancialassetswhichareneitherpastduenorimpairedareasunder:


Longterminvestments 404,630 360,998 Securitydeposits 28,554 34,534 Tradedebts 1,922,564 142,968 Advances,depositsandotherreceivables 123,066 720,807 Cashandbankbalances 512,489 1,408,310 2,991,303 2,667,617

Thecompany’sexposuretocreditriskislimitedtothecarryingamountofunsecuredtradereceivablesandbankbalances.

Theageinganalysisoftradereceivablebalancesisasfollows:


Neitherpastduenorimpaired 1,922,564 142,968 Pastduebutnotimpaired: 1to90days 223,613 7,700 91to180days 167,710 10,834 181to270days 192,816 1,240 above270days 117,497 25,072 701,636 44,846 2,624,200 187,814

Themanagementestimatestherecoverabilityoftradereceivablesonthebasisoffinancialpositionandpasthistoryofitscustomersbasedontheobjectiveevidencethatitwillnotreceivetheamountduefromtheparticularcustomer.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethatthecompanywillnotbeabletocollectalltheamountdueaccording to theoriginal termsof the receivable. Significantfinancialdifficultiesof thedebtors,probability that thedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Theprovisioniswrittenoffbythecompanywhenitexpectsthatitcannotrecoverthebalancedue.Anysubsequentrepaymentsinrelationtoamountwrittenoff,arecrediteddirectlytoprofitandlossaccount.

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Thecreditqualityofcompany’sbankbalancescanbeassessedwithreferencetoexternalcreditratingsasfollows:

Rating Rating 2015 2014 Shortterm Longterm Agency (Rupeesinthousand)

AlBarakaIslamicBankLimited A1 A PACRA 6,973 11,038 AlliedBankLimited A1+ AA+ PACRA 70 76 SummitBankLimited A-1 A JCR-VIS 220,076 277,332 BankAlfalahLimited A1+ AA PACRA 45,042 444,136 DeutscheBankAG A-2 BBB+ Standard&Poor 1,738 0.1 DubaiIslamicBankLimited A-1 A+ JCR-VIS 2 2 FaysalBankLimited A1+ AA PACRA 3,701 7,253 HabibBankLimited A-1+ AAA JCR-VIS 100,686 60,973 HabibMetropolitanBankLimited A1+ AA+ PACRA 99 558,166 MCBBankLimited A1+ AAA PACRA 5,387 2,127 MeezanBankLimited A-1+ AA JCR-VIS 726 4,444 NationalBankofPakistan A-1+ AAA JCR-VIS 202 3,508 StandardCharteredBank(Pakistan)Limited A1+ AAA PACRA 21,443 4,250 UnitedBankLimited A-1+ AA+ JCR-VIS 90,501 15,302 ZaraiTaraqiatiBankLimited A-1+ AAA JCR-VIS 59 58 BankIslamiPakistanLimited A1 A+ PACRA 10,633 12,180 SindhBankLimited A-1+ AA JCR-VIS 4,879 6,922 BurjBankLimited A-2 A- JCR-VIS 271 543 CitibankN.A. P-1 A2 MOODY’S 0.3 0.3 512,489 1,408,310

Duetothecompany’slongstandingbusinessrelationshipswiththesecounterpartiesandaftergivingdueconsiderationtotheirstrongfinancialstanding,managementdoesnotexpectnon-performancebythesecounterpartiesontheirobligationstothecompany.Accordingly,thecreditriskisminimal.

c) Liquidity risk Liquidityriskistheriskthatanentitywillencounterdifficultyinmeetingobligationsassociatedwithfinancialliabilities.

Thecompany’sapproachtomanagingliquidityistoensurethat,asfaraspossible,italwayshassufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossorriskingdamagetothecompany’sreputation.

ThefollowingarethecontractualmaturitiesoffinancialliabilitiesasatDecember31,2015andDecember31,2014:

At December 31, 2015 (Rupeesinthousand) Carrying Lessthan Oneto Morethanfive

amount oneyear fiveyears years

Longtermfinances 3,042,161 1,072,022 1,970,139 – Longtermloanfromrelatedparties 2,232,952 – 2,232,952 – Longtermdeposits 44,860 – – 44,860 Shorttermborrowingfromrelatedparty 2,200,000 2,200,000 – – Shorttermborrowings 15,151,614 15,151,614 – – Tradeandotherpayables 7,266,324 7,266,324 – – Accruedfinancecost 449,423 449,423 – – 30,387,334 26,139,383 4,203,091 44,860

At December 31, 2014 (Rupeesinthousand) Carrying Lessthan Oneto Morethanfive

amount oneyear fiveyears years

Longtermfinances 1,966,071 901,189 1,064,882 – Longtermloanfromrelatedparties 825,968 – 825,968 – Importbillpayable 2,414,400 1,314,400 1,100,000 – Longtermdeposits 48,070 – – 48,070 Shorttermborrowingfromrelatedparty 3,000,000 3,000,000 – – Shorttermborrowings 4,637,446 4,637,446 – – Tradeandotherpayables 6,560,190 6,560,190 – – Accruedfinancecost 319,531 319,531 – – 19,771,676 16,732,756 2,990,850 48,070

44.2 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthecompanyisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Thecarryingvaluesofallfinancialassetsandliabilitiesreflectedinthesefinancialstatementsapproximatetheirfairvalues.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate.Thetablebelowanalysesfinancialinstrumentscarriedatfairvalue,byvaluationmethod.Thedifferentlevelshavebeendefinedasfollows:

- Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1).



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Thefollowingtablepresentsthecompany’sassetsandliabilitiesthataremeasuredatfairvalueatDecember31,2015. (Rupees in thousand)

Level 1 Level 2 Level 3 Total

Recurring fair value measurements Available-for-sale OrdinarysharesofRSL – – 297,120 297,120 Total assets – – 297,120 297,120 Total liabilities – – – – Thefollowingtablepresentsthecompany’sassetsandliabilitiesthataremeasuredatfairvalueatDecember31,2014.

(Rupees in thousand) Level 1 Level 2 Level 3 Total

Recurring fair value measurements Available-for-sale OrdinarysharesofRSL – – 258,177 258,177 Total assets – – 258,177 258,177 Total liabilities – – – –

Movementintheabovementionedassetshasbeendisclosedinnote24.1.1tothesefinancialstatementsandmovementinfairvaluereservehasbeendisclosedinthestatementofchangesinequity.TherewerenotransfersbetweenLevels1and2&Levels2and3duringtheyearandtherewerenochangesinvaluationtechniquesduringtheyears.SinceRSL’sordinarysharesarenotlisted,aninvestmentadvisorengagedbythecompanyhasestimatedafairvalueofRs18.63perordinaryshareasatDecember31,2015throughavaluationtechniquebasedondiscountedcashflowanalysisofRSL.Thecompany’spolicy is to recognise transfers intoand transfersoutof fair valuehierarchy levelsasat theendof the reportingperiod.Changesinlevel2and3fairvaluesareanalysedattheendofeachreportingperiodduringtheannualvaluationdiscussionbetweentheChiefFinancialOfficerandtheinvestmentadvisor.Aspartofthisdiscussion,theinvestmentadvisorpresentsareportthatexplainsthereasonforthefairvaluemovements.

Thefairvalueoffinancialinstrumentstradedinactivemarketsisbasedonquotedmarketpricesatthebalancesheetdate.Amarketisregardedasactiveifquotedpricesarereadilyandregularlyavailablefromanexchange,dealer,broker,industrygroup,pricingservice,orregulatoryagency,andthosepricesrepresentactualandregularlyoccurringmarkettransactionsonanarm’slengthbasis.Thequotedmarketpriceusedforfinancialassetsheldbythecompanyisthecurrentbidprice.TheseinstrumentsareincludedinLevel1.

Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedbyusingvaluationtechniques.Thesevaluationtechniquesmaximisetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.Ifallsignificantinputsrequiredtofairvalueaninstrumentareobservable,theinstrumentisincludedinLevel2.

Ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,theinstrumentisincludedinLevel3.

Specificvaluationtechniquesusedtovaluefinancialinstrumentsinclude:

-Quotedmarketpricesordealerquotesforsimilarinstruments.

-Thefairvalueofinterestrateswapsiscalculatedasthepresentvalueoftheestimatedfuturecashflowsbasedonobservableyieldcurves.

-Other techniques, suchas discountedcash flowanalysis, are used todetermine fair value for the remaining financialinstruments.

Thecarryingvaluelessimpairmentprovisionoftradeandotherreceivables,andpayablesareassumedtoapproximatetheirfairvalues.Thefairvalueoffinancialliabilitiesfordisclosurepurposesisestimatedbydiscountingthefuturecontractualcashflowsatthecurrentmarketinterestratethatisavailabletothecompanyforsimilarfinancialinstruments.Thecarryingvaluesofallfinancialassetsandliabilitiesreflectedinthefinancialstatementsapproximatetheirfairvalues.

44.3 Financial instruments by categories Available Assets at fair Held to Loans and Total for sale value through maturity receivables profit or loss As at December 31, 2015 (Rupees in thousand)

Assets as per balance sheet Securitydeposits – – – 28,554 28,554

Tradedebts – – – 2,624,200 2,624,200 Advances,depositsandother receivables – – – 123,066 123,066 Investments 297,120 – 43,278 – 340,398 Cashandbankbalances – – – 517,458 517,458

297,120 – 43,278 3,293,278 3,633,676

Financial liabilities at amortized cost As at December 31, 2015 (Rupees in thousand) Liabilities as per balance sheet Longtermfinances 3,042,161 Longtermloanfromrelatedparties 2,232,952 Longtermdeposits 44,860 Shorttermborrowingfromrelatedparty 2,200,000 Shorttermborrowings 15,151,614 Tradeandotherpayables 7,266,324 Accruedfinancecost 449,423 30,387,334

Available Assets at fair Held to Loans and Total for sale value through maturity receivables profit or loss As at December 31, 2014 (Rupees in thousand)

Assets as per balance sheet Securitydeposits – – – 34,534 34,534 Tradedebts – – – 187,814 187,814 Advances,depositsandother receivables – – – 720,807 720,807 Investments 258,177 – 38,589 – 296,766 Cashandbankbalances – – – 1,413,455 1,413,455

258,177 – 38,589 2,356,610 2,653,376

Financial liabilities at amortized cost As at December 31, 2014 (Rupees in thousand) Liabilities as per balance sheet Longtermfinances 1,966,071 Longtermloanfromrelatedparties 825,968 Importbillpayable 2,414,400 Longtermdeposits 48,070 Shorttermborrowingfromrelatedparty 3,000,000 Shorttermborrowings 4,637,446 Tradeandotherpayables 6,560,190 Accruedfinancecost 319,531 19,771,676

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44.4 Offsetting financial assets and financial liabilities

(a) Financial assets

Thefollowingfinancialassetsaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:

Gross amounts Gross amount Net amount of Related Net amount Financial assets of recognized of recognized financial assets amounts not not in scope of financial assets financial liabilities presented in the off set in the off setting off set in the balance sheet balance sheet disclosures balance sheet (Rupees in thousand)

Asat31December2015 A B C=A+B D E=C+D Securitydeposits – – – – – 28,554 Tradedebts – – – – – 2,624,200 Advances,depositsandother receivables – – – – – 123,066 Investments – – – – – 404,630 Cashandbankbalances – – – – – 517,458 – – – – –


Asat31December2014 A B C=A+B D E=C+D Securitydeposits – – – – – 34,534 Tradedebts – – – – – 187,814 Advances,depositsandother receivables – – – – – 720,807 Investments – – – – – 360,998 Cashandbankbalances – – – – – 1,413,455 – – – – –

(b) Financial liabilities Thefollowingfinancialliabilitiesaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:

Gross amounts Gross amount Net amount of Related Net amount Financial liabilites of recognized of recognized financial liabilites amounts not not in scope of

financial financial assets presented in the off set in the off setting liabilites off set in the balance sheet balance sheet disclosures balance sheet (Rupees in thousand)

Asat31December2015 A B C=A+B D E=C+D Longtermfinances – – – – – 3,042,161 Longtermloanfromrelatedparties – – – – – 2,232,952 Importbillpayable – – – – – – Longtermdeposits – – – – – 44,860 Shorttermborrowingfromrelatedparty – – – – – 2,200,000 Shorttermborrowings – – – – – 15,151,614 Tradeandotherpayables – – – – – 7,266,324 Accruedfinancecost – – – – – 449,423 – – – – –



Asat31December2014 A B C=A+B D E=C+D Longtermfinances – – – – – 1,966,071 Importbillpayable – – – – – 2,414,400 Longtermloanfromrelatedparty – – – – – 825,968 Longtermdeposits – – – – – 48,070 Shorttermborrowingfromrelatedparty – – – – – 3,000,000 Shorttermborrowings – – – – – 4,637,446 Tradeandotherpayables – – – – – 6,560,190 Accruedfinancecost – – – – – 319,531 – – – – –

44.5 Capital management

Thecompany’sobjectiveswhenmanagingcapitalaretosafeguardthecompany’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimalcapitalstructuretoreducethecostofcapital.Inordertomaintainoradjustthecapitalstructure,thecompanymayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholdersthroughrepurchaseofshares,issuenewsharesorsellassetstoreducedebt.Consistentwithothersintheindustryandtherequirementsofthelenders,thecompanymonitorsthecapitalstructureonthebasisofgearingratio.This ratio iscalculatedasnetdebtdividedbytotalcapitalemployed.Netdebt iscalculatedastotalborrowings(includingcurrentandnon-currentborrowings)lesscashandcashequivalents.Totalcapitalincludesequityasshowninthebalancesheetplusnetdebt.Thecompanyisnotsubjecttoanyexternallyimposedcapitalrequirements.

ThegearingratiosasatDecember31,2015and2014wereasfollows:


Borrowings-notes8,9and14 7,475,113 5,792,039 Less:Cashandcashequivalents -note39 (14,634,156) (3,223,991) Netdebt 22,109,269 9,016,030

Totalequity(includessurplusonrevaluationofoperatingfixedassets) 23,911,341 20,773,411 Gearingratio Percentage 48% 30%

2015 2014

45. Number of employees TotalnumberofemployeesasatDecember31 811 730 Averagenumberofemployeesduringtheyear 741 752

46. Date of authorization for issue ThesefinancialstatementswereauthorizedforissueonApril08,2016bytheBoardofDirectorsofthecompany.


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CONSOLIDATEDFINANCIALSTATEMENTSOF

fortheyearendedDecember31,2015

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Auditors’ Report to the Members


Wehaveaudited theannexedconsolidated financial statementscomprisingconsolidatedbalance sheetof Pakarab Fertilizer

Limited(theholdingcompany)anditssubsidiarycompany(hereinafterreferredtoas‘theGroup’)asatDecember31,2015and

therelatedconsolidatedprofitandlossaccount,consolidatedstatementofcomprehensiveincome,consolidatedstatementof

changesinequityandconsolidatedcashflowstatementtogetherwiththenotesformingpartthereof,fortheyearthenended.We

havealsoexpressedseparateopinionsonthefinancialstatementsofPakarabFertilizersLimitedanditssubsidiarycompany.These

financialstatementaretheresponsibilityoftheholdingcompany’smanagement.Ourresponsibilityistoexpressanopiniononthese

financialstatementbasedonouraudit.

Ourauditwasconducted inaccordancewith the International StandardsonAuditingandaccordingly included such testsof

accountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.

Inouropinion,theconsolidatedfinancialstatementspresentfairlythefinancialpositionofPakarabFertilizerLimitedanditssubsidiary

company(theGroup)asatDecember31,2015andtheresultsoftheiroperationsfortheyearthenended.

A.F.Ferguson&Co.CharteredAccountantsLahore.April08,2016


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Consolidated Balance Sheetas at December 31, 2015


EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorisedsharecapital1,000,000,000(2014:1,000,000,000)ordinarysharesofRs10each 10,000,000 10,000,000

Issued,subscribedandpaidupsharecapital450,000,000(2014:450,000,000)ordinarysharesofRs10each 5 4,500,000 4,500,000Reserves 6 4,570,202 1,852,941

9,070,202 6,352,941

SURPLUS ON REVALUATION OF OPERATING FIXED ASSETS 7 15,022,831 14,491,103

NON-CURRENT LIABILITIES

Longtermfinances-secured 8 1,970,139 1,136,095Longtermloansfromrelatedparties-unsecured 9 2,232,952 825,968Importbillpayable-secured 10 – 1,100,000Longtermdeposits 11 44,860 48,070Deferredliabilities 12 132,980 115,789Deferredtaxation 13 7,959,368 10,192,205

12,340,299 13,418,127

CURRENT LIABILITIES

Currentportionoflongtermloans 8 1,143,236 972,404Shorttermborrowingfromrelatedparty-secured 14 2,200,000 3,000,000Shorttermborrowings-secured 15 15,451,553 4,920,913PayabletoPrivatizationCommissionofPakistan 16 2,197,901 2,197,901Tradeandotherpayables 17 8,491,483 7,685,539Accruedfinancecost 18 455,344 326,929

29,939,517 19,103,686

CONTINGENCIES AND COMMITMENTS 19 66,372,849 53,365,857



ASSETS

NON-CURRENT ASSETS

Property,plantandequipment 20 39,624,467 40,346,187Assetssubjecttofinancelease 21 – –Intangibleassets 22 94,289 125,399Goodwill 23 3,305,163 3,305,163Longterminvestments 24 107,510 102,821Securitydeposits 28,554 34,534

43,159,983 43,914,104

CURRENT ASSETS

Storesandspareparts 25 2,573,378 2,638,695Stock-in-trade 26 7,899,332 993,934Tradedebts 27 2,793,170 405,698Advances,deposits,prepaymentsandotherreceivables 28 9,416,166 3,984,464Cashandbankbalances 29 530,820 1,428,962

23,212,866 9,451,753

66,372,849 53,365,857

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Consolidated Profit and Loss Accountfor the year ended December 31, 2015

Consolidated Statement of Comprehensive Incomefor the year ended December 31, 2015


Sales 30 23,021,808 15,655,993

Costofsales 31 (18,232,840) (13,419,947)

Gross profit 4,788,968 2,236,046

Administrativeexpenses 32 (893,150) (741,373)

Sellinganddistributionexpenses 33 (909,689) (700,157)

2,986,129 794,516

Financecost 34 (1,713,275) (1,683,907)

Otherexpenses 35 (347,879) (13,522)

924,975 (902,913)

Otherincome 36 332,683 1,040,410

Profit before taxation 1,257,658 137,497

Taxation 37 1,346,651 (60,978)

Profit for the year 2,604,309 76,519

Profitattributabletoownersoftheparent 2,604,309 76,519



Profitfortheyear 2,604,309 76,519

Other comprehensive income:

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss

Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss:

Surplusonrevaluationofoperatingfixedassetsrealisedthrough

incrementaldepreciationchargedonrelatedassetsfortheyear 115,832 82,646

Remeasurementofpostretirementbenefitobligation (2,880) (1,290)

112,952 81,356

Other comprehensive income - net of tax 112,952 81,356

Total comprehensive income for the year - net of tax 2,717,261 157,875

Attributabletoownersoftheparent 2,717,261 157,875


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Consolidated Statement of Changes In Equityfor the year ended December 31, 2015

(Rupees in thousand) Attributable to the owners of the parent

Revenue reserves

(Accumulated loss) / un Share General appropriated capital reserve profit Total

Balance as on January 1, 2014 4,500,000 2,098,313 (403,247) 6,195,066

Profitfortheyear – – 76,519 76,519

Othercomprehensiveincomefortheyear-netoftax – – 81,356 81,356

Total comprehensive income for the year – – 157,875 157,875

Balance as on December 31, 2014 4,500,000 2,098,313 (245,372) 6,352,941

Profitfortheyear – – 2,604,309 2,604,309

Othercomprehensiveincomefortheyear-netoftax – – 112,952 112,952

Totalcomprehensiveincomefortheyear – – 2,717,261 2,717,261

Balance as on December 31, 2015 4,500,000 2,098,313 2,471,889 9,070,202



Consolidated Cash Flow Statementfor the year ended December 31, 2015


Cash flows from operating activities

Cash(usedin)/generatedfromoperations 38 (7,943,316) 5,171,593Financecostpaid (1,584,378) (1,570,850)Taxespaid (966,852) (564,569)Retirementbenefitspaid (43,661) (49,587)Securitydeposits-net 2,770 (14,600)

Net cash (outflow)/inflow from operating activities (10,535,437) 2,971,987

Cash flows from investing activities

Purchaseofproperty,plantandequipment (53,221) (59,727)Purchaseofintangibleassets (607) (10,654)Saleproceedsofproperty,plantandequipmentdisposed 26,606 373,052Investmentsmade – (227)Profitonbankdepositsreceived 62,299 24,857

Net cash inflow from investing activities 35,077 327,301

Cash flows from financing activities

Repaymentofredeemablecapital – (1,625,000)Proceedsfromlongtermloansacquired 2,000,000 500,000Proceedsfromlongtermloansacquiredfromrelatedparties 2,003,707 825,968Repaymentoflongtermloans (972,406) (1,539,421)Repaymentoflongtermloansfromrelatedparties (596,723) –Paymentofimportbillpayable (2,539,800) –Proceedsfromshorttermborrowingacquiredfromrelatedparty 500,000 –Paymentofinitialtransactioncostonlongtermloanacquired (23,200) –Repaymentofshorttermborrowingfromrelatedparty (1,300,000) –Paymentoffinanceleaseliabilities – (21,602)

Net cash outflow from financing activities (928,422) (1,860,055)

Net (decrease)/increase in cash and cash equivalents (11,428,782) 1,439,233

Cash and cash equivalents at the beginning of the year (3,491,951) (4,931,184)Cash and cash equivalents at the end of the year 39 (14,920,733) (3,491,951)


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Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2015

1. Legal status and nature of business

Pakarab Fertilizers Limited (the ‘parentcompany’)onApril 12, 2011, incorporatedawhollyowned subsidiarycompany,RelianceSacksLimited(together,the‘group’).Theparentcompanyisprincipallyengagedinthemanufacturingandsaleofchemicalfertilizers(hereinafteralsoreferredtoasthe‘fertilizeroperations’)whilethesubsidiarycompanyisprincipallyengagedinthemanufacturingandsaleofpolypropylenesacks,clothandliners(hereinafteralsoreferredtoasthe‘sacksoperations’).

2. Basis of preparation

2.1 Theseconsolidatedfinancialstatementshavebeenprepared inaccordancewithapprovedaccountingstandardsasapplicablein Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (‘IFRS’) issued by theInternational Accounting Standards Board and Islamic Financial Accounting Standards (‘IFAS’) issued by Institute of CharteredAccountants of Pakistan as are notified under the Companies Ordinance, 1984, provisions of and directives issued under theCompaniesOrdinance,1984.WherevertherequirementsoftheCompaniesOrdinance,1984ordirectives issuedbySecuritiesandExchangeCommissionofPakistandifferwiththerequirementsofIFRSorIFAS,therequirementsoftheCompaniesOrdinance,1984ortherequirementsofthesaiddirectivesprevail.

2.2 Initial application of standards, amendments or an interpretation to existing standards

Thefollowingamendmentstoexistingstandardshavebeenpublishedthatareapplicabletothegroup’sfinancialstatementscoveringannualperiods,beginningonorafterthefollowingdates:

2.2.1 Standards, amendments and interpretations to approved accounting standards that are effective in current year

Certain standards, amendments and interpretations to approved accounting standards are effective for accounting periodsbeginningonJanuary1,2015butareconsiderednottoberelevantortohaveanysignificanteffectonthegroup’soperationsandare,therefore,notdetailedinthesefinancialstatements,exceptforthefollowing:

-IFRS13‘Fairvaluemeasurement’.Thestandardaimstoimproveconsistencyandreducecomplexitybyprovidingaprecisedefinitionof fairvalueandasinglesourceof fairvaluemeasurementanddisclosure requirements foruseacross IFRSs. The requirementsdonotextendtheuseoffairvalueaccountingbutprovideguidanceonhowitshouldbeappliedwhereitsuseisalreadyrequiredorpermittedbyotherstandardswithinIFRSs.Thestandardonlyaffectsthedisclosuresinthegroup’sfinancialstatments.

2.2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group

Therearecertainstandards,amendmentstotheapprovedaccountingstandardsandinterpretationsthataremandatoryforgroupshavingaccountingperiodsbeginningonorafterJanuary1,2016butareconsiderednottoberelevantortohaveanysignificanteffectonthegroup’soperationsandare,therefore,notdetailedinthesefinancialstatements.

3. Basis of measurement

3.1 Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconventionasmodifiedbytherevaluationofcertainoperatingfixedassetsandcertainfinancialinstrumentsatfairvalueandrecognitionofcertainemployeeretirementbenefitsatpresentvalue.

3.2 Critical accounting estimates and judgments

Thegroup’ssignificantaccountingpoliciesarestatedinnote4.Notallofthesesignificantpoliciesrequirethemanagementtomakedifficult, subjective or complex judgment or estimates. The following is intended to providean understanding of the policies themanagementconsiderscriticalbecauseoftheircomplexity, judgmentofestimation involvedintheirapplicationandtheir impactonthesefinancialstatements.Estimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperience,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Thesejudgmentsinvolveassumptionsorestimatesinrespectoffutureeventsandtheactualresultsmaydifferfromtheseestimates.

a) Employee retirement benefits

Thegroupusesthevaluationperformedbyanindependentactuaryasthepresentvalueofitsretirementbenefitobligations.Thevaluationisbasedonassumptionsasmentionedinnote4.3.

b) Provision for taxation

Thegrouptakesintoaccountthecurrentincometaxlawandthedecisionstakenbyappellateauthorities.Instanceswherethegroup’sviewdiffersfromtheviewtakenbytheincometaxdepartmentattheassessmentstageandwherethegroupconsidersthatitsviewsonitemsofmaterialnatureisinaccordancewithlaw,theamountsareshownascontingentliabilities.

c) Useful lives and residual values of property, plant and equipment

Thegroupreviewstheusefullivesandresidualvaluesofproperty,plantandequipmentonregularbasis.Anychangeinestimatesinfutureyearsmightaffectthecarryingamountsoftherespectiveitemsofproperty,plantandequipmentwithacorrespondingeffectonthedepreciationchargeandimpairment.

d) Estimated impairment of goodwill

Thegrouptestsannuallywhethergoodwillhassufferedanyimpairment,inaccordancewiththeaccountingpolicystatedinnote4.8.Therecoverableamountsofcash-generatingunitshavebeendeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequiretheuseofestimates(note23).

e) Revaluation surplus on operating fixed assets

Certain operating fixed assets are carried under the revaluation model as per International Accounting Standard (‘IAS’)16 ‘Property,PlantandEquipment’asstated innote4.4.1.Revaluation iscarriedoutwithsufficient regularity toensurethatthecarryingamountofassetsdoesnotdiffermateriallyfromtheir fairvalue.Revaluedamounthasbeendeterminedbyanindependentprofessionalvalueronthebasisofpresentmarketvalue(note7).

4. Significant accounting policies

Thesignificantaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoallyearspresented.

4.1 Principles of consolidation

a) Subsidiaries

Subsidiariesareallentities(includingspecialpurposeentities)overwhichthegrouphasthepowertogovernthefinancialandoperatingpoliciesgenerallyaccompanyingashareholdingofmorethanonehalfofthevotingrights.Theexistenceandeffectofpotentialvotingrightsthatarecurrentlyexercisableorconvertibleareconsideredwhenassessingwhetherthegroupcontrolsanotherentity.Thegroupalsoassessesexistenceofcontrolwhereitdoesnothavemorethan50%ofthevotingpowerbutisabletogovernthefinancialandoperatingpoliciesbyvirtueofde-factocontrol.De-factocontrolmayariseincircumstanceswherethesizeofthegroup’svotingrightsrelativetothesizeanddispersionofholdingsofothershareholdersgivethegroupthepowertogovernthefinancialandoperatingpolicies,etc.

Subsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtothegroup.Theyaredeconsolidatedfromthe

datethatcontrolceases.

Thegroupappliestheacquisitionmethodtoaccountforbusinesscombinations.Theconsiderationtransferredfortheacquisitionofasubsidiaryisthefairvaluesoftheassetstransferred,theliabilities incurredtotheformerownersoftheacquireeandtheequityinterestsissuedbythegroup.Theconsiderationtransferredincludesthefairvalueofanyassetorliabilityresultingfromacontingentconsiderationarrangement.Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate.Thegrouprecognisesanynon-controllinginterestintheacquireeonanacquisition-by-acquisitionbasis,eitheratfairvalueoratthenon-controllinginterest’sproportionateshareoftherecognisedamountsofacquiree’sidentifiablenetassets.

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Acquisition-relatedcostsareexpensedasincurred.

Ifthebusinesscombinationisachievedinstages,theacquisitiondatefairvalueoftheacquirer’spreviouslyheldequityinterestintheacquireeisremeasuredtofairvalueattheacquisitiondatethroughprofitorloss.

Anycontingentconsiderationtobetransferredbythegroupis recognisedatfairvalueattheacquisitiondate.SubsequentchangestothefairvalueofthecontingentconsiderationthatisdeemedtobeanassetorliabilityisrecognisedinaccordancewithIAS39eitherinprofitorlossorasachangetoothercomprehensiveincome.Contingentconsiderationthatisclassifiedasequityisnotremeasured,anditssubsequentsettlementisaccountedforwithinequity.

Goodwillisinitiallymeasuredastheexcessoftheaggregateoftheconsiderationtransferredandthefairvalueofnon-controllinginterestoverthenetidentifiableassetsacquiredandliabilitiesassumed.Ifthisconsiderationislowerthanthefairvalueofthenetassetsofthesubsidiaryacquired,thedifferenceisrecognisedinprofitorloss.

“Inter-company transactions, balances, incomeand expenses on transactions between group companies are eliminated.Profitsandlossesresultingfrominter-companytransactionsthatarerecognisedinassetsarealsoeliminated.Accountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbythegroup.

b) Changes in ownership interests in subsidiaries without change of control

Transactionswithnon-controllingintereststhatdonotresultinlossofcontrolareaccountedforasequitytransactions–thatis,astransactionswiththeownersintheircapacityasowners.Thedifferencebetweenfairvalueofanyconsiderationpaidandtherelevantshareacquiredofthecarryingvalueofnetassetsofthesubsidiaryisrecordedinequity.Gainsorlossesondisposalstonon-controllinginterestsarealsorecordedinequity.

c) Disposal of subsidiaries

Whenthegroupceasestohavecontrolanyretainedinterestintheentityisre-measuredtoitsfairvalueatthedatewhencontrolislost,withthechangeincarryingamountrecognisedinprofitorloss.Thefairvalueistheinitialcarryingamountforthepurposesofsubsequentaccountingfortheretainedinterestasanassociate, jointventureorfinancialasset. Inaddition,anyamountspreviouslyrecognisedinothercomprehensiveincomeinrespectofthatentityareaccountedforasifthegrouphaddirectlydisposedoftherelatedassetsorliabilities.Thismaymeanthatamountspreviouslyrecognisedinothercomprehensiveincomearereclassifiedtoprofitorloss.

d) Associates

Associatesareallentitiesoverwhichthegrouphassignificantinfluencebutnotcontrol,generallyaccompanyingashareholdingofbetween20%and50%ofthevotingrights.Investmentsinassociatesareaccountedforusingtheequitymethodofaccounting.Under theequitymethod, the investment is initially recognisedatcost,andthecarryingamount is increasedordecreasedto recognise the investor’s shareof theprofitor lossof the investeeafter thedateofacquisition. Thegroup’s investment inassociatesincludesgoodwillidentifiedonacquisition.

Iftheownershipinterestinanassociateisreducedbutsignificantinfluenceisretained,onlyaproportionateshareoftheamountspreviouslyrecognisedinothercomprehensiveincomeisreclassifiedtoconsolidatedprofitandlossaccountwhereappropriate.

Thegroup’sshareofpost-acquisitionprofitorlossisrecognisedintheconsolidatedprofitandlossaccount,anditsshareofpost-acquisitionmovements inothercomprehensive incomeis recognised inothercomprehensive incomewithacorrespondingadjustmenttothecarryingamountoftheinvestment.Whenthegroup’sshareoflossesinanassociateequalsorexceedsitsinterestintheassociate,includinganyotherunsecuredreceivables,thegroupdoesnotrecognisefurtherlosses,unlessithasincurredlegalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.

Thegroupdeterminesateachreportingdatewhetherthere isanyobjectiveevidencethatthe investment intheassociateis impaired. If this is thecase, thegroupcalculates theamountof impairmentas thedifferencebetween the recoverableamountoftheassociateanditscarryingvalueandrecognisestheamountadjacenttoshareofprofit/(loss)ofassociatesintheconsolidatedprofitandlossaccount.

Profitsandlossesresultingfromupstreamanddownstreamtransactionsbetweenthegroupanditsassociatearerecognisedin thegroup’sfinancial statementsonly to theextentofunrelated investor’s interests in theassociates.Unrealised lossesareeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.Accountingpoliciesofassociateshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbythegroup.

Dilutiongainsandlossesarisingininvestmentsinassociatesarerecognisedintheconsolidatedprofitandlossaccount.

4.2 Taxation

Incometaxcomprisescurrentanddeferredtax.Incometaxisrecognizedintheprofitandlossaccountexcepttotheextentthatitrelatestoitemsrecognizeddirectlyinequity,inwhichcaseitisrecognizeddirectlyinequity.

Current

Provisionofcurrenttaxisbasedonthetaxableincomefortheyeardeterminedinaccordancewiththeprevailinglawfortaxationofincome.Thechargeforcurrenttaxiscalculatedusingprevailingtaxratesortaxratesexpectedtoapplytotheprofitfortheyearifenacted.Thechargeforcurrenttaxalsoincludesadjustments,whereconsiderednecessary,toprovisionfortaxmadeinpreviousyearsarisingfromassessmentsframedduringtheyearforsuchyears.

ThegrouphasoptedforGrouptaxationundersection59AAoftheIncomeTaxOrdinance,2001.

Deferred

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectofalltemporarydifferencesarisingfromdifferencesbetween the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in thecomputationofthetaxableprofit.However,thedeferredtaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthatatthetimeoftransactionneitheraffectsaccountingnortaxableprofitorloss.Deferredtaxliabilitiesaregenerallyrecognizedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognizedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferences,unusedtaxlossesandtaxcreditscanbeutilised.

Deferredtaxiscalculatedattheratesthatareexpectedtoapplytotheperiodwhenthedifferencesreversebasedontaxratesthathavebeenenactedorsubstantivelyenactedbythebalancesheetdate.Deferredtaxischargedorcreditedintheprofitandlossaccount,exceptinthecaseofitemscreditedorchargedtoothercomprehensiveincomeorequityinwhichcaseitisincludedinothercomprehensiveincomeorequity.

4.3 Employee retirement benefits

Themainfeaturesoftheschemesoperatedbythegroupforitsemployeesareasfollows:

(a) Defined benefit plan - Gratuity

Thegroupoperatesanapprovedfundeddefinedbenefitgratuityplanforallpermanentemployeesofthefertilizeroperationshavingaserviceperiodofmorethanthreeyearsforexecutivesandsixmonthsforworkersandotherstaff.Provisionsaremadeinthefinancialstatementstocoverobligationsonthebasisofactuarialvaluationscarriedoutannually.ThemostrecentvaluationwascarriedoutasatDecember31,2015usingthe“ProjectedUnitCreditMethod”.

Theactualreturnonplanassetsrepresentsthedifferencebetweenthefairvalueofplanassetsatthebeginningoftheyearand

asattheendoftheyearafteradjustmentsforcontributionsmadebythegroupasreducedbybenefitspaidduringtheyear.

Theamountrecognizedinbalancesheetrepresentsthepresentvalueofthedefinedbenefitobligationasreducedbythefairvalueoftheplanassets.

Actuarialgainsandlossesarisingfromexperienceadjustmentsandchangesinactuarialassumptionsarechargedorcreditedtoequityinothercomprehensiveincomeintheyearinwhichtheyarise.Pastservicecostsarerecognizedimmediatelyintheprofitandlossaccount.

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The futurecontribution rateof theplan includesallowances fordeficitandsurplus.ProjectedUnitCreditMethod,using thefollowingsignificantassumptions,isusedforvaluationofthisscheme:

Discountrate 9%p.a. Expectedrateofincreaseinsalarylevelperannum 8%p.a. Durationofplan(years) 9 Expectedmortalityrate SLIC(2001-2005)mortality table(setback1year)

(b) Defined contribution plan - Provident Fund

Thereisanapproveddefinedcontributoryprovidentfundforallpermanentemployeesofthefertilizeroperations.Equalmonthlycontributionsaremadebothbythegroupandemployeestothefundattherateof8.33percentofsalaryfortheexecutivesand10percentofsalaryfortheworkers.

(c) Accumulating compensated absences

Thefertilizeroperationsprovidesforaccumulatingcompensatedabsences,whentheemployeesrenderservicesthatincreasetheirentitlementtofuturecompensatedabsences.Undertheservicerules,workersandnormalstaffmembersareentitledto18daysleaveperyear.Theleavepolicyformanagementemployeesisasfollows:

Service in the company Annual Leaves Lessthan05Years 18 Lessthan05Years(WorkingonShiftDuties) 22 Morethan05Years 25 Morethan05Years(WorkingonShiftDuties) 29

TheunutilizedAnnualLeavecanbeaccumulateduptoamaximumof2yearsofAnnualLeaves.Anemployeewillbeentitled

toencashtheaccumulatedannualleavesatthetimeofleavingcompanyservice.

Provisionsaremadeannuallytocovertheobligationforaccumulatingcompensatedabsencesbasedonactuarialvaluationandarechargedtoprofitand lossaccount.Themost recentvaluationwascarriedoutasatDecember31,2015usingthe“ProjectedUnitCreditMethod”.

Theamountrecognisedinthebalancesheetrepresentsthepresentvalueofthedefinedbenefitobligation.Actuarialgainsandlossesarechargedtotheprofitandlossaccountimmediatelyintheperiodwhentheseoccur.

Projected unit credit method, using the following significant assumptions, has been used for valuation of accumulatingcompensatedabsences:

Discountrate 9%p.a. Expectedrateofincreaseinsalarylevelperannum 8%p.a. Expectedmortalityrate SLIC(2001-2005)mortality table(setback1year)

4.4 Property, plant and equipment

4.4.1 Operating fixed assets

Operatingfixedassetsexcept freehold land,buildingson freehold land, railway siding,plantandmachineryand toolsandotherequipmentarestatedatcostlessaccumulateddepreciationandanyidentifiedimpairmentloss.Freeholdlandisstatedatrevaluedamountlessanyidentifiedimpairmentlosswhilebuildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentarestatedatrevaluedamountlessaccumulateddepreciationandanyidentifiedimpairmentloss.Revaluationiscarriedoutwithsufficientregularitytoensurethatthecarryingamountofassetsdoesnotdiffermateriallyfromtheirfairvalue.Anyaccumulateddepreciationatthedateofrevaluationiseliminatedagainstthegrosscarryingamountoftheasset,andthenetamountisrestatedtotherevaluedamountoftheasset.Costinrelationtootheroperatingfixedassetssignifieshistoricalcost,gainsandlossestransferredfromothercomprehensiveincomeonqualifyingcashflowhedgesasreferredtoinnote4.13.

Increasesinthecarryingamountarisingonrevaluationofoperatingfixedassetsarecreditedtosurplusonrevaluationofoperatingfixedassets.Decreases thatoffsetprevious increasesof the sameassetsarechargedagainst this surplus,allotherdecreasesarechargedtoprofitor loss.Eachyear thedifferencebetweendepreciationbasedon revaluedcarryingamountsof theassets (thedepreciationchargedtotheprofitorloss)anddepreciationbasedontheassets’originalcostistransferredfromsurplusonrevaluationofoperatingfixedassetstoothercomprehensiveincome.Alltransfersto/fromsurplusonrevaluationofoperatingfixedassetsarenetofapplicabledeferredtaxation.

Depreciationonoperatingfixedassetsischargedtoprofitorlossonthefollowingmethodsandratessoastowriteoffthedepreciableamountofanassetoveritsestimatedusefullifeaftertakingintoaccounttheirresidualvalues:

Asset category Depreciation method Annual depreciation rate

Buildingsonfreeholdland Straightline 3.99%to5.31% Buildingsonleaseholdland -do- 4%to10% Railwaysiding -do- 26% Aircrafts -do- 10%to10.08% Furnitureandfixtures -do- 10%to26.09% Toolsandotherequipment(otherthanfactoryequipment) -do- 10%to50% Vehicles -do- 20% Plantandmachinery-Sacksoperations -do- 4.35%to4.76% Plantandmachinery-Fertilizeroperations Unitsofproduction Toolsandotherequipment(factoryequipment) -do- Catalyst -do-

The assets’ residual values and useful lives are reviewed, at each financial year end, andadjusted if impact on depreciation issignificant.


Subsequentcostsare included in theasset’s carryingamountor recognisedasa separateasset,asappropriate, onlywhen it isprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothegroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairandmaintenancecostsarechargedtoincomeduringtheperiodinwhichtheyareincurred.

Thegainor lossondisposalor retirementofanasset representedby thedifferencebetweenthesaleproceedsandthecarryingamountoftheassetisrecognisedasanincomeorexpense.

4.4.2 Capital work-in-progress

Capitalwork-in-progressisstatedatcostlessanyidentifiedimpairmentloss.Allexpenditureconnectedwithspecificassetsincurredduringinstallationandconstructionperiodarecarriedundercapitalwork-in-progress.Thesearetransferredtooperatingfixedassetsasandwhentheseareavailableforuse.

4.4.3 Major spare parts and stand-by equipment

Majorsparepartsandstand-byequipmentqualifyasproperty,plantandequipmentwhenanentityexpectstousethemduringmorethanoneyear.Transfersaremadetooperatingassetscategoryasandwhensuchitemsareavailableforuse.

4.5 Intangible assets

4.5.1 Computer software

Expenditureincurredtoacquirecomputersoftwareiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationandanyidentifiedimpairmentloss.Computersoftwareisamortisedusingthestraightlinemethodoveraperiodoffouryears.


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4.5.2 Mining rights

Expenditureincurredtoacquireminingrightsiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationandanyidentifiedimpairmentloss.Miningrightsareamortisedusingthestraightlinemethodoveraperiodoftenyears.


4.6 Impairment of non-financial assets

Assetsthathaveanindefiniteusefullife-forexample,goodwillorintangibleassetsnotreadytouse-arenotsubjecttoamortisationandaretestedannuallyforimpairment.Assetsthataresubjecttoamortisationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashflows(cash-generatingunits).Non-financialassetsotherthangoodwillthatsufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentateachreportingdate.

4.7 Leases

Thegroupisthelessee.

4.7.1 Finance leases

Leaseswherethegrouphassubstantiallyalltherisksandrewardsofownershipareclassifiedasfinanceleases.Atinceptionfinanceleasesarecapitalisedatthelowerofpresentvalueofminimumleasepaymentsundertheleaseagreementsandthefairvalueoftheassets.

Therelatedrentalobligations,netoffinancecharges,areincludedinliabilitiesagainstassetssubjecttofinancelease.Theliabilitiesareclassifiedascurrentandlongtermdependinguponthetimingofthepayment.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the balanceoutstanding.Theinterestelementoftherentalischargedtoprofitorlossovertheleaseterm.

Assetsacquiredunderafinanceleasearedepreciatedovertheusefullifeoftheassetonastraight-linemethodattheratesgiveninnote21.Depreciationofleasedassetsischargedtoprofitorloss.

4.7.2 Operating leases

Leaseswhereasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)arechargedtoprofitorlossonastraight-linebasisovertheleaseterm.

4.8 Goodwill

Goodwillrepresentstheexcessofthecostofanacquisitionoverthefairvalueofthegroup’sshareofthenetidentifiableassetsoftheacquiredsubsidiary/associateatthedateofacquisition.Goodwillonacquisitionsofsubsidiariesisincludedin‘intangibleassets’.Goodwillonacquisitionsofassociates is included in ‘investments inassociates’and is tested for impairmentaspartof theoverallbalance.Separatelyrecognisedgoodwillistestedannuallyforimpairmentandcarriedatcostlessaccumulatedimpairmentlosses.Impairmentlossesongoodwillarenotreversed.Gainsandlossesonthedisposalofanentityincludethecarryingamountofgoodwillrelatingtotheentitysold.

4.9 Investments

Investmentsintendedtobeheldforlessthantwelvemonthsfromthebalancesheetdateortobesoldtoraiseoperatingcapital,areincludedincurrentassets,allotherinvestmentsareclassifiedasnon-current.Managementdeterminestheappropriateclassificationofitsinvestmentsatthetimeofthepurchaseandre-evaluatessuchdesignationonaregularbasis.

4.9.1 Investments in equity instruments of associate

Investmentsinequityinstrumentsofassociatesareaccountedforusingtheequitymethodofaccountingandareinitiallyrecognisedatcost.Thegroup’sinvestmentinassociatesincludesgoodwill(netofanyaccumulatedimpairmentloss) identifiedonacquisition.Thegroup’sshareofitsassociates’post-acquisitionprofitsorlossesisrecognisedintheconsolidatedprofitandlossaccount,anditsshareofpost-acquisitionmovementsinreservesisrecognisedinreserves.Thecumulativepost-acquisitionmovementsareadjustedagainstthecarryingamountoftheinvestment.Whenthegroup’sshareoflossesinanassociateequalsorexceedsitsinterestintheassociate,includinganyotherunsecuredreceivables,thegroupdoesnotrecognisefurtherlosses,unlessithasincurredobligationsormadepaymentsonbehalfoftheassociate.Unrealisedgainsontransactionsbetweenthegroupanditsassociatesareeliminatedtotheextentofthegroup’sinterestintheassociates.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.

4.10 Financial assets

4.10.1 Classification

Thegroupclassifiesitsfinancialassetsinthefollowingcategories:atfairvaluethroughprofitorloss,loansandreceivables,availableforsaleandheldtomaturity.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatthetimeofinitialrecognition.

a) Financial assets at fair value through profit or loss

Financialassetsatfairvaluethroughprofitorlossarefinancialassetsheldfortradingandfinancialassetsdesignateduponinitialrecognitionasatfairvaluethroughprofitorloss.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedashedges.Afinancialassetisclassifiedasheldfortradingifacquiredprincipallyforthepurposeofsellingintheshortterm.Assetsinthiscategoryareclassifiedascurrentassetsifexpectedtobesettledwithintwelvemonths,otherwise,theyareclassifiedasnon-current.

b) Loans and receivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Theyare includedincurrentassets,exceptformaturitiesgreaterthantwelvemonthsafterthebalancesheetdate,whichareclassifiedasnon-currentassets.Loansandreceivablescompriseloans,advances,depositsandotherreceivablesandcashandcashequivalentsinthebalancesheet.

c) Available-for-sale financial assets

Available-for-salefinancialassetsarenon-derivativesthatareeitherdesignatedinthiscategoryornotclassifiedinanyoftheother categories. Theyare included in non-current assets unlessmanagement intends todisposeof the investmentswithintwelvemonthsfromthebalancesheetdate.

d) Held to maturity

Financialassetswithfixedordeterminablepaymentsandfixedmaturity,wheremanagementhastheintentionandabilitytoholdtillmaturityareclassifiedasheldtomaturityandarestatedatamortisedcost.

4.10.2 Recognition and measurement

Allfinancialassetsarerecognisedatthetimewhenthegroupbecomesapartytothecontractualprovisionsoftheinstrument.Regularpurchasesandsalesofinvestmentsarerecognisedontrade-date–thedateonwhichthegroupcommitstopurchaseorselltheasset.Financialassetsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.Financialassetscarriedatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvalueandtransactioncostsareexpensedintheprofitandlossaccount.Financialassetsarederecognisedwhentherightstoreceivecashflowsfromtheassetshaveexpiredorhavebeentransferredandthegrouphastransferredsubstantiallyalltherisksandrewardsofownership.Available-for-salefinancialassetsandfinancialassetsatfairvaluethroughprofitorlossaresubsequentlycarriedatfairvalue.Available-for-salefinancialassetsarecarriedatcostincasefairvaluecannotbemeasuredreliably.Loansandreceivablesandheld-to-maturityinvestmentsarecarriedatamortisedcostusingtheeffectiveinterestratemethod.

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Gainsorlossesarisingfromchangesinthefairvalueofthe‘financialassetsatfairvaluethroughprofitorloss’categoryarepresentedintheprofitandlossaccountintheperiodinwhichtheyarise.Dividendincomefromfinancialassetsatfairvaluethroughprofitorlossisrecognisedintheprofitandlossaccountaspartofotherincomewhenthegroup’srighttoreceivepaymentsisestablished.

Changesinthefairvalueofsecuritiesclassifiedasavailable-for-salearerecognisedinothercomprehensiveincome.Whensecuritiesclassifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsrecognisedinequityareincludedintheprofitand lossaccountasgainsand losses from investmentsecurities. Interestonavailable-for-salesecuritiescalculatedusing theeffectiveinterestmethodisrecognisedintheprofitandlossaccount.Dividendsonavailable-for-saleequityinstrumentsarerecognisedintheprofitandlossaccountwhenthegroup’srighttoreceivepaymentsisestablished.

Thefairvaluesofquotedinvestmentsarebasedoncurrentprices. If themarketforafinancialasset isnotactive(andforunlistedsecurities),thegroupmeasurestheinvestmentsatcostlessimpairmentinvalue,ifany.

Thegroupassessesateachbalancesheetdatewhetherthere isobjectiveevidencethatafinancialassetoragroupoffinancialassetsis impaired.Ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativelossisremovedfromequityandrecognisedintheprofitandlossaccount.Impairmentlossesrecognisedintheprofitandlossaccountonequityinstrumentsarenotreversedthroughtheprofitandlossaccount.Impairmenttestingoftradedebtsandotherreceivablesisdescribedinnote4.16.

4.11 Financial liabilities

Allfinancialliabilitiesarerecognisedatthetimewhenthegroupbecomesapartytothecontractualprovisionsoftheinstrument. Afinancial liability isderecognisedwhentheobligationundertheliability isdischargedorcancelledorexpired.Whereanexisting

financialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability,andthedifferenceinrespectivecarryingamountsisrecognisedintheprofitandlossaccount.

4.12 Offsetting of financial assets and financial liabilities

Financialassetsandfinancialliabilitiesareoffsetandthenetamountisreportedinthefinancialstatementsonlywhenthereisalegallyenforceablerighttosetofftherecognizedamountandthegroupintendseithertosettleonanetbasisortorealizetheassetsandtosettletheliabilitiessimultaneously.

4.13 Derivative financial instruments

Theseareinitiallyrecordedatcostonthedateaderivativecontractisenteredintoandareremeasuredtofairvalueatsubsequentreportingdates.Themethodofrecognizingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.Thegroupdesignatescertainderivativesascashflowhedges.

Thegroupdocumentsattheinceptionofthetransactiontherelationshipbetweenthehedginginstrumentsandhedgeditems,aswellasitsriskmanagementobjectiveandstrategyforundertakingvarioushedgetransactions.Thegroupalsodocumentsitsassessment,bothathedgeinceptionandonanongoingbasis,ofwhetherthederivativesthatareusedinhedgingtransactionsarehighlyeffectiveinoffsettingchangesincashflowofhedgeditems.

Theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyascashflowhedgesisrecognized

inothercomprehensive income.Thegainor loss relatingtothe ineffectiveportion is recognized immediately intheprofitand lossaccount.

Amountsaccumulatedinothercomprehensiveincomearerecognisedinprofitandlossaccountintheperiodswhenthehedgeditemwillaffectprofitorloss.However,whentheforecasthedgedtransactionresultsintherecognitionofanon-financialassetoraliability,thegainsandlossespreviouslydeferredinothercomprehensiveincomearetransferredfromothercomprehensiveincomeandincludedintheinitialmeasurementofthecostoftheassetorliability.Thechangesinfairvaluere-measurementofderivativeswhichthegrouphasnotdesignatedasahedginginstrumentarerecognisedintheprofitandlossaccount.Tradingderivativesareclassifiedasacurrentassetorliability.

4.14 Stores and spare parts

Thesearevaluedatweightedaveragecostexcept for items in transitwhicharestatedat invoicevalueplusotherchargespaidthereontillthebalancesheetdate.Foritemswhichareslowmovingand/oridentifiedasobsolete,adequateprovisionismadeforanyexcessbookvalueoverestimatedrealisablevalue.Thegroupreviewsthecarryingamountofstoresandsparesonaregularbasisandprovisionismadeforobsolescence.

4.15 Stock-in-trade

Allstocksarevaluedatthelowerofcostandnetrealizablevalue.Costinrelationtorawandpackingmaterialsandgoodspurchasedforresale,exceptforthoseintransit,signifiesweightedaveragecostandthatrelatingtomidproductsandownmanufacturedfinishedgoods,annualaveragecostcomprisingcostofdirectmaterials,labourandappropriatemanufacturingoverheads.

Materialsintransitarestatedatcostcomprisinginvoicevalueplusotherchargesincurredthereon.

Netrealizablevaluesignifiestheestimatedsellingpriceintheordinarycourseofbusinesslesscostsnecessarilytobeincurredinordertomakethesale.Provisionismadeinthefinancialstatementsforobsoleteandslowmovingstock-in-tradebasedonmanagementestimate.

4.16 Trade debts and other receivables

Tradedebtsandotherreceivablesarerecognisedinitiallyatinvoicevalue,whichapproximatesfairvalue,andsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod, lessprovisionfordoubtfuldebts.Aprovisionfordoubtfuldebts isestablishedwhenthereisobjectiveevidencethatthegroupwillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Significantfinancialdifficultiesofthedebtors,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Whenatradedebtisuncollectible,itiswrittenoffagainsttheprovision.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedtotheprofitandlossaccount.

4.17 Cash and cash equivalents

Cashandcashequivalents includescash inhand,depositsheldatcallwithbanks,other short-termhighly liquid investmentswithoriginalmaturitiesof threemonthsor less, andbankoverdrafts / short termborrowings. Bankoverdraftsare shownwithincurrentliabilitiesonthebalancesheet.

4.18 Borrowings

Borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.Borrowingsaresubsequentlystatedatamortisedcost,anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvalueisrecognisedintheprofitandlossaccountovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.Financecostsareaccountedforonanaccrualbasisandarereportedunderaccruedfinancecoststotheextentoftheamountremainingunpaid.

Borrowingsareclassifiedascurrentliabilitiesunlessthegrouphasanunconditionalrighttodefersettlementoftheliabilityforatleasttwelvemonthsafterthebalancesheetdate.

4.19 Trade and other payables

Tradeandotherpayablesare recognised initiallyat fair valueand subsequentlymeasuredatamortisedcostusing theeffectiveinterestmethod.Exchangegainsandlossesarisingontranslationinrespectofliabilitiesinforeigncurrencyareaddedtothecarryingamountoftherespectiveliabilities.

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4.20 Provisions

Provisionsarerecognizedwhenthegrouphasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimateoftheamountcanbemade.Provisionsarenotrecognisedforfutureoperatinglosses.

Where there are a number of similar obligations, the likelihood that an outflow shall be required in settlement is determined byconsideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.

Provisionsaremeasuredatthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligationusingapre-taxrate

thatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheobligation.Theincreaseintheprovisionduetopassageoftimeisrecognisedasinterestexpense.

4.21 Foreign currency transactions and translation

a) Functional and presentation currency

Itemsincludedinthefinancialstatementsofthegrouparemeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhich thegroupoperates (the functionalcurrency). The financial statementsarepresented in PakRupees,which is thegroup’sfunctionalandpresentationcurrency.

b) Transactions and balances

Allmonetary assets and liabilities in foreign currencies are translated into Pak Rupees at exchange rates prevailing at thebalancesheetdate.TransactionsinforeigncurrenciesaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsandliabilitiesthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrencythatarestatedatfairvaluearetranslatedintoPakRupeesatexchangeratesprevailingatthedatewhenfairvaluesaredetermined.Exchangegainsandlossesareincludedinprofitandlossaccount.

4.22 Borrowing costs

Generalandspecificborrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets,whichareassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduseorsale.Investmentincomeearnedonthetemporaryinvestmentof specificborrowingspending theirexpenditureonqualifyingassets isdeducted fromtheborrowingcostseligible forcapitalisation.Allotherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.

4.23 Revenue recognition

Revenue is recognisedwhen it isprobable that theeconomicbenefitswill flow to thegroupand the revenuecanbemeasuredreliably.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableonthefollowingbasis:

-Revenuefromsaleofgoodsandexportrebateisrecognizedondispatchtocustomers.

-RevenuefromsaleofCertifiedEmissionReductions(‘CERs’)isrecognisedonthegenerationoftheEmissionReductionswhenafirmcommitmentforsaleofCERsexistswithabuyer.

-Returnondepositsisaccruedonatimeproportionbasisbyreferencetotheprincipaloutstandingandtheapplicablerateofreturn.

-Dividend incomeandentitlement of bonus shares are recognisedwhen the right to receive suchdividendandbonus shares isestablished.

-Governmentsubsidyonsaleoffertilizerisrecognisedwhentherighttoreceivesuchsubsidyhasbeenestablishedandtheunderlyingconditionsaremet.

4.24 Share capital

Ordinarysharesareclassifiedasequityandrecognisedattheirfacevalue.Incrementalcostsdirectlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax.

4.25 Dividend

Dividenddistributiontothemembersisrecognisedasaliabilityintheperiodinwhichthedividendsareapproved.

5. Issued, subscribed and paid up share capital

2015 2014 2015 2014 (Numberofshares) (Rupeesinthousand)

2,791,260 2,791,260 OrdinarysharesofRs10eachfullypaidincash 27,913 27,913 447,208,740 447,208,740 OrdinarysharesofRs10eachissuedasfullypaidbonusshares 4,472,087 4,472,087

450,000,000 450,000,000 4,500,000 4,500,000


Ordinarysharesoftheparentcompanyheldbyassociated undertakingsasatyearendareasfollows: RelianceCommodities(Private)Limited 7,136,613 7,136,613 FatimaSugarMillsLimited 84,145,872 71,250,558 FazalClothMillsLimited – 25,790,610 ArifHabibCorporationLimited 135,000,000 135,000,000 AmirFineExports(Private)Limited 12,895,296 – 239,177,781 239,177,781


6. Reserves Revenue: -Generalreserve 2,098,313 2,098,313 -Un-appropriatedprofit/(accumulatedloss) 2,471,889 (245,372)

4,570,202 1,852,941

7. Surplus on revaluation of operating fixed assets

Thisrepresentssurplusoverbookvalueresultingfromtherevaluationoffreeholdland,buildingsonfreeholdland,plantandmachinery,railwaysidingandtoolsandotherequipment,adjustedbyincrementaldepreciationarisingoutofrevaluationoftheabovementionedassetsexceptfreeholdland.Thevaluationoftheassetswascarriedoutbyanindependentvaluer,M/sPirsonsChemicalEngineering(Private)Limited,onAugust31,2014.Surplusonrevaluationofoperatingfixedassetscanbeutilizedbythegrouponlyforthepurposesspecifiedinsection235oftheCompaniesOrdinance,1984.

Therevaluationsurplusrelatingtoabovementionedoperatingfixedassetsexcludingfreeholdlandisnetofapplicabledeferredin-come taxes. Incrementaldepreciation represents thedifferencebetween theactualdepreciationon theabovementionedassetsexcludingfreeholdlandandtheequivalentdepreciationbasedonthehistoricalcostoftheseassets.Themovementinrevaluationsurplus is as follows:

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Openingbalance-netoftax 14,491,103 11,884,336 Revaluationsurplusduringtheyear -note20.1 – 3,055,295 Deferredtaxonrevaluationsurplus -note13 647,560 (365,882) Surplustransferredtoothercomprehensiveincomefortheyear onaccountofincrementaldepreciation-netoftax (115,832) (82,646)

Closingbalance-netoftax -note7.1 15,022,831 14,491,103

7.1 IncludessurplusonrevaluationoffreeholdlandamountingtoRs5,865.66million(2014:Rs5,865.66million).


8. Long term finances - secured

Redeemablecapital -note8.1 – – Longtermloans -note8.2 3,113,375 2,108,499 3,113,375 2,108,499 Currentportionshownundercurrentliabilities (1,143,236) (972,404)

1,970,139 1,136,095

8.1 Redeemable capital

ThisrepresentsPrivatelyPlacedTermFinanceCertificates(‘PPTFCs’).Thesewereredeemedlastyear.


Openingbalance – 1,625,000 Redeemedduringtheyear – (1,625,000) Currentportionshownundercurrentliabilities – – – –

– –

8.2 Long term loans

Thesehavebeenobtainedfromthefollowingfinancialinstitutions: StandardCharteredBank(Pakistan)Limited-Loan1 -note8.2.1 – 166,667 StandardCharteredBank(Pakistan)Limited-Loan2 -note8.2.2 333,332 500,000 FaysalBankLimited -note8.2.3 250,000 416,667 PakistanKuwaitInvestmentCompany(Private)Limited -note8.2.4 62,500 187,500 PAIRInvestmentCompanyLimited -note8.2.5 285,714 428,571 SoneriBankLimited -note8.2.6 133,333 266,666 AlliedBankLimited -note8.2.7 1,977,282 – MeezanBankLimited -note8.2.8 71,214 142,428

3,113,375 2,108,499 Currentportionshownundercurrentliabilities (1,143,236) (972,404)

1,970,139 1,136,095

8.2.1Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom9.21%to11.59%perannum.

8.2.2 Thisrepresentstermloanfacilityforbalancesheetrestructuring.Itisrepayableinfoursemi-annualinstallmentsofRs83.333millioneachendingonDecember31,2017.MarkupispayablemonthlyattherateofthreemonthsKarachiInter-BankOfferedRate(‘KIBOR’)plus1.50%perannum.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.07%to11.13%perannum.Theloanissecuredbyfirstparipassuchargeoverthepresentandfuturecurrentassetsofthefertilizeroperations.

8.2.3 Thisrepresentsatermfinancefacilityobtainedtofinancethegroup’scapitalexpenditurerequirements.Itisrepayableinthreesemi-annual installments of Rs 83.333millioneachendingon June 14, 2017andcarriesmark upat the rateof sixmonths KIBORplus1.70%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.22%to11.37%perannum. It is securedbyaparipassuchargeonallpresentand future fixedassetsexcluding theassetscomprisingofAmmoniaConverterBasket, the LamontBoiler forNitricAcid, theBombardierChallengeraircraft, theassetscomprisingof theCleanDevelopmentMechanism(‘CDM’)project,thecompletecarbondioxiderecoveryplant/liquefactionplantandthelandandbuildingsoftheexcludedassets.

8.2.4 This represents termfinance facility tofinance thegroup’scapacityexpansion. It is repayableonJune29,2016andcarriesmarkupattherateofsixmonthsKIBORplus2.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.76%to11.09%perannum.ItissecuredbyafirstparipassuchargeonallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetank,toolsanditsspares,toolsandaccessories.

8.2.5 Thisrepresentstermfinancefacilityforbalancesheetrestructuringandgroup’scapitalexpenditurerequirements.Itisrepayableinfoursemi-annualinstallmentsofRs71.429millioneachendingonAugust27,2017andcarriesmarkupattherateofsixmonthsKIBORplus2.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom9.32%to12.44%perannum.Itissecuredbyafirstparipassuchargeonthepresentandfuturefixedassetsoffertilizeroperations.

8.2.6 This represents termfinance facility tomeet thegroup’scapitalexpenditure/repaymentofexpensivedebt. It is repayable in twosemi-annualinstallmentsofRs66.667millioneachendingNovember2,2016andcarriesmarkupattherateofsixmonthsKIBORplus1.75%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.22%to11.91%perannum.ItissecuredbyafirstparipassuchargeonthepresentandfuturefixedassetsoffertilizeroperationsincludinglandandbuildingandmachineryexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetank,toolsanditsspares,toolsandaccessoriesandthelandandbuildingsrelatedtotheseassets.

8.2.7 Thisrepresentstermfinancefacilitytomeetgroup’srepaymentofimportbillpayable.Itisrepayableintensemi-annualinstallmentsofRs200millioneachcommencingfromMay24,2016andcarriesmarkupattherateofsixmonthsKIBORplus2%perannum,payablesemi-annualy.Themarkupratechargedduringtheyearontheoutstandingbalanceis8.52%perannum.ItissecuredbyafirstparipassuchargeoverallpresentandfutureplantandmachineryfertilizeroperationsexcludingassetscomprisingofAmmoniaConverterBasket, theLamontboiler forNitricAcid, theassetscomprisingof theCDMproject, thecompletecarbondioxide recoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankandanexclusivechargeovertheBombardierChallengeraircraft.Thereconciliationofthecarryingamountofloanisasfollows:


Receipt 2,000,000 – Initialtransactioncost (23,200) –

1,976,800 – Amortizationofinitialtransactioncost -note34 482 –

1,977,282 – Currentmaturity (400,000) –

1,577,764 –

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8.2.8 ThisrepresentsdiminishingmusharikafacilityofRs250millionforfinancingthepurchaseofbothlocalandimportedplantandmachinery.AsofDecember31,2015,theprincipalisrepayableinfourquarterlyinstallmentsofRs17.804millioneachendingonDecember15,2016andcarriesmarkupattherateofsixmonthsKIBORplus1.6%perannumwithafloorof8%andacapof25%.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom6.52%to9.66%perannum.ThefacilityissecuredbyaregisteredmortgageofRs100millionoverthebuilding/superstructureonthesacksoperation’slease-holdland,anexclusivehypothecationchargeonplantandmachinery,aguaranteefromthegroupandundertakingfromtherelatedparty(associatedcompany),FatimaFertilizerCompanyLimited(‘FATIMA’),nottomortgageunencumberedlandonwhichthesacksoperation’sprojecthasbeenbuilt.


9. Long term loans from related parties - unsecured

Thesehavebeenobtainedfromthefollowingrelatedparties: FatimaHoldingsLimited(associatedcompany) – 442,287 RelianceCommodities(Private)Limited(associatedcompany) 877,982 34,292 MemberandChairman’sspouse 371,491 313,032 Chairman’schildren 116,914 – Directors 866,565 36,357

-note9.1 2,232,952 825,968

9.1 ThisisrepayableinaperiodoftwoyearscommencingfromJanuary1,2017ontermsthataretobemutuallyagreedbetweentheparties.Markupispayablesemi-annuallyatarateofsixmonthsKIBORplus1.5%perannum.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.98%to8.51%perannum.

10. Import bill payable - secured

ThishasbeenpaidduringtheyearthroughproceedsofloanacquiredfromAlliedBankLimitedasreferredtoinnote8.2.7tothesefinancialstatements.

11. Long term deposits

Theserepresentinterestfreesecuritydepositsfromcustomersandcarriagecontractorsandarerepayableoncancellation/withdrawalofthedealershiporoncessationofthebusinesswiththegrouprespectively.


12. Deferred liabilities

Accumulatingcompensatedabsences -note12.1 97,166 80,812 Retirementbenefits-gratuityfund -note12.2 35,814 34,977

132,980 115,789

12.1 Accumulating compensated absences

Openingbalance 80,812 86,320 Chargetoprofitandlossaccount -note12.1.2 25,038 3,925 105,850 90,245 Paymentsmadeduringtheyear (8,684) (9,433)



12.1.1 Movement in liability for accumulating compensated absences

Openingpresentvalueofaccumulatingcompensatedabsences 80,812 86,320 Currentservicecost 15,971 11,830 Interestcost 8,029 5,741 Benefitspaidduringtheyear (8,684) (9,433) Remeasurementduringtheyear 1,038 (13,646)

Closingpresentvalueofaccumulatingcompensatedabsences 97,166 80,812

12.1.2 Charge for the year

Currentservicecost 15,971 11,830 Interestcost 8,029 5,741 Remeasurementduringtheyear 1,038 (13,646)

Expensechargedtotheprofitandlossaccount 25,038 3,925

Amountsforcurrentperiodandpreviousfourannualperiodsofaccumulatingcompensatedabsencesareasfollows:

2015 2014 2013 2012 2011

As at December 31 (Rupeesinthousand)

Presentvalueofaccumulating compensatedabsences 97,166 80,812 86,320 84,150 66,001

Experienceadjustmentarisingonobligation 1,038 (13,646) – – –

Theaveragenumberofleavesaccumulatedperannumistendaysforexecutivesandfivedaysforworkersandotherstaff.


12.2 Gratuity fund

Theamountsrecognisedinthebalancesheetareasfollows: Presentvalueofdefinedbenefitobligation 171,990 149,293 Fairvalueofplanassets (136,176) (114,316)


Openingnetliability 34,977 40,152 Chargetoprofitandlossaccount 24,630 24,449 Chargetorelatedparty 8,304 9,240 Netremeasurementsfortheyear 2,880 1,290 Contributionbythecompany (34,977) (40,154)


Themovementinthepresentvalueofdefinedbenefitobligationisasfollows: Openingpresentvalueofdefinedbenefitobligation 149,293 129,962 Currentservicecost 31,098 31,179 Interestcost 14,620 14,762 Benefitspaidtoout-goingmembersduringtheyear (20,104) (23,738) Remeasurementsonobligation (2,917) (2,872)

Presentvalueofdefinedbenefitobligationasatyearend 171,990 149,293

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Themovementinfairvalueofplanassetsisasfollows: Openingfairvalue 114,316 89,810 Expectedreturnonplanassets 12,784 12,252 Companycontributions 34,977 40,154 Benefitspaidtoout-goingmembersduringtheyear (20,104) (23,738) Remeasurementsonfairvalueofplanassets (5,797) (4,162)

Fairvalueasatyearend 136,176 114,316

Plan assets are comprised as follows: Mixedfunds 104,574 76,086 Cash 31,602 38,230

136,176 114,316

ThegroupisexpectedtocontributeRs30.258milliontothegratuityfundinthenextyear.

Thepresentvalueofdefinedbenefitobligation,thefairvalueofplanassetsandthesurplusordeficitofgratuityfundisasfollows:

2015 2014 2013 2012 2011 (Rupeesinthousand)

Presentvalueofdefinedbenefitobligation (171,990) (149,293) (129,962) (115,230) (88,126) Fairvalueofplanassets 136,176 114,316 89,810 82,105 64,824

Loss (35,814) (34,977) (40,152) (33,125) (23,302)

Experienceadjustmentonobligation -2% -2% 5% 3% 6% Experienceadjustmentonplanassets -4.26% -3.64% -1.44% -0.95% 0.89%

Thesensitivityofthedefinedbenefitobligationtochangesintheweightedprincipalassumptionsis:

Impact on defined benefit obligation

Change in Increase in Decrease in assumptions assumption assumption (Rupeesinthousand)

Discountrate 1% 157,335 189,091 Salarygrowthrate 1% 189,344 156,856


13. Deferred taxation

Liability/(asset)fordeferredtaxationcomprisestemporarydifferencesrelatingto:

Acceleratedtaxdepreciation 8,894,067 10,460,494 Accumulatingcompensatedabsences (29,150) (28,284) Provisionfordoubtfulreceivable (2,673) (3,119) Postretirementmedicalbenefitsandotherallowancespayable (3,454) (4,030) Interestreceivable 6,982 6,752 Unrealisedrecoveryofchemicalcatalyst 48,820 56,957 Transactioncostonlongtermloans 6,815 – Goodwill 991,549 1,092,676 Unusedtaxlosses (1,455,557) (1,108,744) Unusedtaxcredits (498,030) (280,497)

7,959,369 10,192,205

Deferred taxasseton tax lossesavailable forcarry forwardand those representingminimumtaxpaidavailable forcarryforwardundersection113oftheIncomeTaxOrdinance,2001arerecognizedtotheextentthattherealisationofrelatedtaxbenefitsthroughfuturetaxableprofitsisprobable.


Thegrossmovementindeferredtaxliabilityduringtheyearisasfollows: Openingbalance 10,192,205 9,927,247 Deferredtaxonrevaluationsurplus -note7 (647,560) 365,882 Creditedtoprofitandlossaccount -note37 (1,585,277) (100,924)

Closingbalance 7,959,369 10,192,205

14. Short term borrowing from related party - secured

Asofthebalancesheetdate,thisrepresentsarenewablelimit,inthenatureofrunningfinancefacility,ofRs3billionavailablefromFATIMA,a relatedparty (associatedcompany).During theyear, this failitywaschanged fromShort TermLoan toarenewablelimit,inthenatureofrunningfinancefacility,afterthechangeintermsoftheloanwereapprovedbythemembersofFATIMAintheirAnnualGeneralMeetingheldonApril30,2015.MarkupispayablequarterlyattherateofsixmonthsKIBORplus2.12%.Therateofmarkupcharged,duringtheyear,rangesfrom8.63%to11.75%perannum.Thisfacilityisfullysecuredagainst rankingchargeonallpresentand futurefixedassetsof the fertilizeroperations.Asper the terms, the facilitywasrepayablebyDecember31,2015.

However,inDecember2015,thegroupsentacommunicationtoFATIMA,requestingittorenewthefacilityforafurtherperiod

ofoneyearonthesametermsandconditionsasalreadyagreedbetweenthegroupandFATIMA.

Basedon thecommunication from thegroup,considering ita viable investment, theBoardofDirectorsof FATIMA, in itsmeetingheldonDecember29,2015,agreedtorenewthisfacilityforafurtherperiodofoneyearthatwillbepresentedformembers’approvalintheupcomingAnnualGeneralMeetingofFATIMA.


15. Short term borrowings - secured

Runningfinances -note15.1 10,501,915 3,092,378 Termfinances -note15.2 4,949,638 1,828,535

15,451,553 4,920,913

15.1 Running finances

Short term runningfinance facilitiesavailable fromcommercialbanksundermarkuparrangementsamount toRs13,559million(2014:Rs4,524million).Theratesofmarkuprangefrom7.26%to12.40%ontheoutstandingbalanceorpartthereof.Theaggregate running financesare securedagainstpledgeof stock-in-tradeas referred to in note 26.1and registeredhypothecationchargeoncurrentassetsofthegroupandfixedassetsofthefertilizeroperationsincludingtheLamontBoiler,AmmoniaConverterBasket,assetscomprisingCDMprojectandcompletecarbondioxide recoveryplantof the fertilizeroperations.IncludedintheaboveisarunningfinanceofRs385.504million(2014:Rs376.199million)[availablelimit:Rs400million(2014:Rs400million)]fromSummitBankLimited,arelatedparty(associatedcompany).

15.2 Term finances

TermfinancefacilitiesavailablefromvariouscommercialbanksunderprofitarrangementsamounttoRs6,504million(2014:Rs2,590million).Theratesofprofitrangefrom7.39%to12.13%ontheoutstandingbalanceorpartthereof.TheaggregatetermfinancesaresecuredagainstfirstparipassuchargeoverallcurrentandfixedassetsofthefertilizeroperationsincludingtheLamontBoiler,AmmoniaConverterBasket,assetscomprisingCDMprojectandcompletecarbondioxiderecoveryplantofthefertilizeroperationsandpledgeofrawmaterials,stock-in-trade,hypothecationchargeonallcurrentassetsofthesacksoperations.

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15.3 Letters of credit and guarantees

OftheaggregatefacilityofRs5,405million(2014:Rs5,417million)foropeninglettersofcreditandRs288million(2014:Rs88million)forguarantees,theamountutilisedatDecember31,2015wasRs2,240million(2014:1,426million)andRs17million(2014:Rs17million)respectively.Thefacilityforopeninglettersofcreditissecuredagainstimportdocumentsandregisteredjointparipassuchargeovercurrentassetswhereasfacilityforguaranteesissecuredagainstregisteredjointparipassuchargeovercurrentassets.

16. Payable to Privatization Commission of Pakistan

RelianceExports (Private)Limited(‘REL’),under thetermsandconditionsstated in the‘SharePurchaseAgreement’ (‘theAgreement’),acquired100%sharesintheparentcompanyonJuly14,2005throughtheprocessofprivatization.UnderthetermsoftheAgreement,thepurchaseconsideration, inadditiontolumpsumcashpayment, includedafurtherpaymentequivalentto90%ofthegroup’sclaimoftaxrefundaggregatingtoRs2,814.511millionfortheassessmentyears1993-94,1995-96through2002-2003andtaxyears2003and2004.TheamountispayabletothePrivatizationCommissionintheeventofandatthetimeofcashreceiptoftherefundfromtheconcernedtaxauthorities.

TheamountrecognizedinthesefinancialstatementsaspayabletoPrivatizationCommissionisnetoffRs240.119millionwhich,

accordingtothemanagementofthegroup,hasalreadybeenwithdrawnbythePreviousMembersaspartofthedividenddistributionfortheyearendedJune30,2005.ThemanagementofthegroupfeelsthattheAgreementaspresentlyworded,ifexecuted,wouldresultintodoublepaymentofthesameamounttothePrivatizationCommission/PreviousMembers,firstly,aspartoftheprofitsfortheyearendedJune30,2005(computedwithoutrecognitionofthetaxexpensefortheyearsforwhichwhentherefundisissued,anamountequivalentto90%wouldbetherightofthePrivatizationCommission/PreviousMembers)andsecondly,atthetimetherefundisreceivedfromthetaxauthoritieswhenanamountequivalentto90%ofsuchrefundispaidofftothePrivatizationCommission,asagreed.ThemanagementofthegroupfeelsthatsuchdoublepaymentisneithertheintentionnorwarrantedunderthespecificprovisionsoftheAgreement.

UpondissolutionofRELanditsamalgamationwiththeparentcompanyonJuly14,2005,thisliabilitywasrecognisedinthebooksoftheparentcompanybeingthesurvivingentityuponREL’samalgamationwiththeparentcompanyinaccordancewiththeSchemeofArrangementforAmalgamation.


17. Trade and other payables

Tradecreditors 2,785,913 3,720,662 Suigasbillpayable -note17.1 – 6,147 Securitydeposits 32,105 16,652 Accruedliabilities -notes17.2&17.3 2,400,261 1,587,607 Workers’profitparticipationfund -note17.4 731,012 711,097 Workers’welfarefund 273,040 247,374 Customers’balances 186,333 1,249,938 Bankguaranteesdiscounted 1,987,767 76,100 Duetorelatedparty – 16,838 Duetoemployees’providentfundtrust 1,312 177 Withholdingtaxpayable 61,540 11,193 Excisedutypayable 1,724 1,724 Salestaxpayable – 17,081 Electricitydutypayable 30,171 22,558 Retentionmoney 245 342 Duetoemployees 60 49

8,491,483 7,685,539

17.1 This amount is payable to Sui Northern Gas Pipelines Limited (‘SNGPL’), a related party (associated company) againstpurchaseofgas.

17.2 AccruedliabilitiesincludeRs1,071million(2014:Rs1,061million)onaccountofGasInfrastructureDevelopmentCess(‘GIDC’).Duringtheyear,theParliamentpassedtheGIDCAct2015inMay2015whichseekstoimposeGIDClevysince2011.ThegrouphaschallengedthevalidityandpromulgationofGIDCAct,2015beforetheHonorableSindhHighCourt,whereintheCourtpassedinterimorders,therebyrestrainingSNGPLfromchargingorrecoveringGIDC.

17.3 IncludesbonusofRs7.5million(2014:Rs7.5million)payabletothedirectors.


17.4 Workers’ profit participation fund

Openingbalance 711,097 730,152 Provisionfortheyear -note35 67,543 8,763 Interestfortheyear -note34 695 186

779,335 739,101 Paymentsmadeduringtheyear (48,323) (28,004)


TheparentcompanyhasanagreementwiththeWorkersWelfareFund(‘WWF’),MinistryofLabourandManpower,GovernmentofPakistanwherebythebalanceamountofWorkers’ProfitParticipationFund(‘WPPF’)remainingafterdeductingtheworkers’portionofWPPFthatisrequiredtobedepositedintheWWF,wouldbeusedforestablishingahospitalfortheworkersasperthemechanismdefinedinthatagreement.


18. Accrued finance cost

Accruedmarkupon: -longtermloans-secured 38,593 27,519 -longtermloansfromrelatedparties-unsecured -note18.1 97,712 – -shorttermborrowingfromrelatedparty-secured -note18.2 97,701 176,641 -shorttermborrowings-secured -note18.3 221,338 122,769

455,344 326,929

18.1 Thisamountispayabletothefollowingrelatedparties:

RelianceCommodities(Private)Limited(associatedcompany) 39,152 – MemberandChairman’sspouse 16,015 – Chairman’schildren 5,067 – Directors 37,478 –

97,712 –

18.2 ThisamountispayabletoFATIMA,arelatedparty(associatedcompany).

18.3 IncludesanamountofRs8.314million(2014:Rs11.574million)payabletoSummitBankLimited,arelatedparty(associatedcompany).

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19. Contingencies and commitments

19.1 Contingencies

(i) ThegrouphasnettedoffanamountofRs240.119millionfromtheamountpayabletothePrivatizationCommission,aspartofpurchaseconsideration,atthetimeandintheeventtherefundisreceivedfromthetaxauthorities.Incase,thegroup’scontentionrelatingtopossibledoublepaymentisnotaccededtobytheotherpartytotheSharePurchaseAgreement,thegroupiscontingentlyliabletotheaforesaidamountofRs240.119million.Incase,theamountbecomespayable,thecorrespondingeffectwouldbereflectedinthecomputationofgoodwill.

(ii) Thegrouphasissuedfollowingguaranteesinfavourof:

-SNGPLagainstgassaleamountingtoRs10million(2014:Rs10million).

-PakistanStateOilCompanyLimited(‘PSO’)againstfuelforaircraftamountingtoRs7million(2014:Rs7million).

-MeezanBankLimitedassecurityagainstfinanceobtainedbyitssacksoperations.

(iii) AsatJune30,2004,thegrouphadinvestmentof140,000ordinarysharesofRs10eachvaluingRs100,000inNationalFertilizer Marketing Limited, being the associated company on that date. On May 20, 2005, this investment wastransferredtoNationalFertilizerCorporationofPakistan(Private)Limitedbythemanagementofthegroup.However,thenewbuyer,RelianceExports(Private)LimitedfiledanapplicationbeforePrivatizationCommissionchallengingthistransferonthegroundsthatsuchtransferhadbeencarriedoutagainstthetermsandconditionsofthebiddocuments.Incaseofapositiveoutcometotheapplication,thisinvestmentwouldbere-instated.

(iv) AnamountofRs129.169millionwaswithdrawnbythepreviousmembersoftheparentcompanyaspartofdividendfortheyearendedJune30,2005undertheSharePurchaseAgreement.Outoftheaggregateamount,Rs89.39millionrepresents thevalueofcertaincatalysts recovered inconsequenceofcleandownoperationssof theplantprior toundertakingtheprocessofprivatization,whichwasaccountedforasincomeinthefinancialstatementsfortheyearendedJune30,2005inthelightofapplicablefinancialreportingframework.

Themanagementofthegroupfeelsthatnotwithstandingtheapplicabilityofthefinancialreportingframework,onthefinancialstatementsfortheyearendedJune30,2005,theamountwasnotdistributableaspartofdividendforthatyearinviewoftheclearunderstandingbehindtheexecutionoftheAgreementascategoricallyconfirmed,inwriting,bythePrivatizationCommissionpriortosigningoftheAgreement.Similarly,thebalanceamountofRs39.779millionisconsideredtobedividenddistributionoutofthethenavailablereserveswhichwasalsonotdistributabletothepreviousmembersintermsofothercovenantsoftheAgreement.

Thegrouphasfiledaclaimfortherecoveryoftheaforesaidaggregateamountonthegroundsthatinthepresentform,thedistributionhasbeenmadeoutoftheaccumulatedreserves,fortheyearsuptoJune30,2004,which,underthespecificprovisionsoftheAgreementwerenotdistributabletothepreviousmembersoftheparentcompany.Incaseofapositiveoutcometothegroup’sclaim, theexcessdividendwithdrawnbythepreviousmembersof theparentcompanywouldberecovered.

(v) Throughashowcausenotice,thedepartmentraisedtheissueofshortpaymentofoutputsalestaxonsuppliesofthegroup’sfertilizerproduct,CalciumAmmoniumNitrate(‘CAN’)fortheperiodfromApril18,2011toDecember31,2011involvingaprincipal sales taxdemandofRs500million. Such issuewas raisedon thegrounds thatnotificationSRO15(I)/2006,providing for levyof sales taxon thebasisof ‘notifiedprice’ofCAN,waswithdrawnthroughnotificationSRO313(I)/2011datedApril18,2011andhence,thegroupwaslegallyrequiredtorecoveroutputsalestaxonsuppliesofCANonthebasisofactualconsiderationreceivedthereagainst.ThegrouphadalreadyapproachedtheFederalBoardofRevenue(‘FBR’)ontheissueforcondonationintermsofsection65oftheSalesTaxAct,1990,whichwasnotentertained.ThegrouphasassailedsuchorderthroughinstitutionofawritpetitionbeforeHighCourtonthegroundsthatrelevantpowershavebeenexercisedinanarbitrarymannerwithoutreferringthemattertocompetentauthorityasrequiredunderthelaw.Whilesuchconstitutionalpetitionhasnotyetbeendisposed,sincemanagementconsidersthatgroup’sstanceisbasedonmeritoriousgroundsandhencereliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeinthesefinancialstatements.

(vi) Forassessmentyears1993-94and1995-96through2002-2003andfortaxyears2003through2005,thegroup,inviewofthepositiontakenbythetaxauthoritiesthattheincomeofthegroupischargeabletotaxonthebasisof‘netincome’,hadprovided for in thefinancial statements the tax liabilityonnet incomebasiswhichaggregated toRs5,223.343million.Taxliabilitiesadmittedinrespectivereturnsoftotalincomeinrespectoftheseassessment/taxyears,however,aggregatedtoRs1,947.671millionbeingtheliabilitiesleviableunderthePresumptiveTaxRegime(‘PTR’),consideredbythemanagementtobeapplicableinrespectofgroup’sincomefromsaleofownmanufacturedfertilizerproducts.

The Appellate Tribunal Inland Revenue (‘ATIR’) through its separate orders for the assessment years 1993-94, 1995-96 through 2002-03 upheld the group’s position as taken in respective returns of total income and consequently,management reversed theexcessprovisionsaggregating toRs3,275.673millionon the strengthof such judgments.ATIR’sdecisionsinrespectofcertainassessmentyearshavealsobeenupheldbytheLahoreHighCourtwhiledisposingdepartmentalappealsagainstrespectiveordersofATIR.IncometaxdepartmenthasstatedlyagitatedtheissuefurtherbeforeSupremeCourtofPakistan,whichispendingadjudication.

InviewofthefavourabledisposalofthematteruptothelevelofHighCourt,managementofthegroupfeelsthatthedecisionoftheapexcourtwouldalsobeinthefavourofthegroupandhenceinthesefinancialstatements,taxliabilitiesinrespectofabovereferredassessment/taxyearshavebeenprovidedonthebasisthatgroup’sincomeduringsuchyearswastaxableunderPTR.Incase,theapexcourtdecidesthematterotherwise,amountaggregatingtoRs3,275.673millionwillhavetoberecognizedastaxexpenseinrespectofsuchassessment/taxyears.

(vii) IncludedintradedebtsisanamountofRs18.877million(2014:Rs18.877million)whichhasnotbeenacknowledgedasdebtsbyitscustomersduetoadisputeregardingthediscountontheproduct’sprice.Thegroup’scustomershadcollectivelyfiledanappealregardingthepricedisputebeforetheCivilCourt,Multan,whichdecidedthecaseinfavourofthegroup’scustomers.ThegrouppreferredanappealbeforetheDistrictandSessionsCourt,MultanwhichsetasidetheorderoftheCivilCourt.Thegroup’scustomersfiledarevisedpetitionbeforetheLahoreHighCourtagainsttheorderoftheDistrictandSessionsCourt,whichispendingforadjudication.Basedontheadviceofthegroup’slegalcounsel,thegroup’smanagementconsidersthattherearemeritoriousgroundstodefendthegroup’sstanceandhence,noprovisionhasbeenmadeinthesefinancialstatementsonthisaccount.

(viii) Duringtheyear,throughashowcausenotice,thedepartmentraisedtheissueofnon-paymentofoutputsalestaxonstockoffertilizerproducttransferredtovariouswarehousesofthegroupinvolvingaprincipalsalestaxdemandofRs909.125million(notincludingdefaultsurchargewhichwillbecalculatedatthetimeofdeposit)alongwithapenaltyequal to100%of theprincipal sales taxdemand.Such issuewas raisedon thegrounds that theabovementionedtransfers are sales under section 2(44) of the Sales TaxAct, 1990, and hence, the same havebeenmadewithoutpaymentofsalestax.ThemanagementhasassailedthesubjectorderinusualappellatecoursebeforeCommissionerInlandRevenue(Appeals)[‘CIR(A)’]whichispendingadjudication.Furthermore,arestraintorderdatedNovember23,2015waspassedbytheLahoreHighCourtstayingtherecoveryofthisdemandfromthegroup.Managementconsidersthattherearestronggroundstosupportthegroup’sstanceandishopefulofafavorabledecision.Consequently,noprovisionhasbeenmadeinthesefinancialstatementsfortheabovementionedamount.

(ix) OnJuly5,2006,PakistanNationalShippingCorporation (‘PNSC’)fileda recovery suit forUSD1.5millionagainst thegroupbeforetheCivilCourt,LahoreclaimingthatithadsufferedlossesasthegroupunilaterallyterminatedtheCharterPartyAgreement(‘CPA’)betweenthePNSCandthegroup.AsperthetermsoftheCPA,PNSCwastotransport300,000metrictonsofrockphosphateforthegroupbetweenFebruary1,2005toMay31,2006atarateofUSD41permetricton fromCasablancaport toKarachiport.However,PNSCclaimedthat thegrouphadunilaterally terminatedCPAaftertheprivatizationoftheparentcompanyin2005.ThegroupalsofiledacountersuitagainstPNSCclaimingthatithadviolatedthetermsoftheCPAbydivertingshipscarryinggroup’scargotootherportscausingthegroup’scargotoarrivelaterthanexpectedresultinginlosstothegroup.TheCourtreferredthemattertothearbitratorwhothroughitsawarddatedApril22,2010decidedthematterinPNSC’sfavourandconfirmingitsclaimatUSD1.3millionandmarkupattherateof14%tobecalculatedfromthedateofawardtillthetimeofdeposit.ThegroupbeingaggrievedhasfiledanapplicationagainsttheawardofarbitratorbeforetheCivilCourt,Lahorewhichispendingadjudication.Basedontheadviceofthegroup’slegalcounsel,themanagementconsidersthatgroup’sstanceisbasedonmeritoriousgroundsandhence reliefwouldbesecured fromtheCourt,noprovisionon thisaccounthasbeenmade in thesefinancialstatements.

(x) Duringtheyear,thegrouppurchasedLiquefiedNaturalGas(‘LNG’)fromPakistanStateOilCompanyLimited(‘PSO’)underthevariousdirectivesofMinistryofPetroleumandNaturalResources(‘MP&NR’),GovernmentofPakistan.Includedin the cost bookedduring the year relating to LNGareprovisional charges of Sui SouthernGasCompany Limited(‘SSGC’)andSuiNorthernGasPipelinesLimited(‘SNGPL’)(hereinaftercollectivelyreferredtoasthe‘GasCompanies’)thatarebasedontheabovementionedGovernmentdirectivesanddeterminationofOilandGasRegulatoryAuthority(‘OGRA’) forotherconsumers through itsdecisiondatedMarch18,2016.Basedon theadviceof thegroup’s legalcounsel, management strongly believes that the amounts claimed by theGas Companies from the groupwouldeventuallybeinlinewiththeabovebasis.Consequently,noprovisionhasbeenmadeinthesefinancialstatementsforthedifferentialamountofRs448.950millionbasedontheadviceofthegroup’slegalcounselthattherearemeritoriousgroundstofollowtheabovebasis.

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19.2 Commitments in respect of

(i) LettersofcreditotherthanforcapitalexpenditureRs98.022million(2014:Rs107.317million).

(ii) Theamountoffuturepaymentsunderoperatingleasesandtheperiodinwhichthesepaymentswillbecomedueareas follows:


Notlaterthanoneyear 61,932 42,265 Laterthanoneyearandnotlaterthanfiveyears 122,178 34,108

184,110 76,373

20. Property, plant and equipment

Operatingfixedassets -note20.1 39,538,136 40,233,289 Capitalwork-in-progress -note20.2 30,567 38,477 Capitalstoresandstand-byequipment -note20.3 55,764 74,421

39,624,467 40,346,187

20.1 Operating fixed assets


Freehold land Buildings on Buildings on Railway Plant and Aircrafts Furniture Tools and Vehicles Catalyst Total freehold leasehold siding machinery and other land fixtures equipment

COST BalanceasatJanuary01,2014 4,767,634 2,057,264 132,812 36,800 28,955,826 2,783,209 73,312 722,729 212,406 217,312 39,959,304 Additionsduringtheyear – 4,853 33,555 – 33,590 7,372 907 8,394 6 – 88,677 Revaluation 2,009,966 45,022 – 1,000 996,197 – – 3,110 – – 3,055,295 Transfersinfromassetssubjecttofinancelease – – – – – – – – 161,879 – 161,879 Disposalsduringtheyear – – – – – (505,796) – (127) (57,690) – (563,613) Adjustmentsduringtheyear – – (2,345) – – – – – – – (2,345) againstcostonrevaluation – (313,061) – (28,800) (1,053,736) – (23,957) (179,094) – – (1,598,648)

BalanceasatDecember31,2014 6,777,600 1,794,078 164,022 9,000 28,931,877 2,284,785 50,262 555,012 316,601 217,312 41,100,549

BalanceasatJanuary01,2015 6,777,600 1,794,078 164,022 9,000 28,931,877 2,284,785 50,262 555,012 316,601 217,312 41,100,549 Additionsduringtheyear – 6,960 22,828 – 1,440 – 678 28,017 207 19,658 79,788 Disposalsduringtheyear – – – – – – – (19,138) (59,887) – (79,025) BalanceasatDecember31,2015 6,777,600 1,801,038 186,850 9,000 28,933,317 2,284,785 50,940 563,890 256,921 236,970 41,101,311

DEPRECIATION BalanceasatJanuary01,2014 – 242,137 5,064 22,401 1,009,317 768,557 18,654 149,220 191,508 74,694 2,481,552 Chargefortheyear-note20.1.3 – 107,401 5,588 9,475 93,617 111,620 8,618 50,580 12,091 2,483 401,473 Transfersinfromassetssubjecttofinancelease – – – – – – – – 140,676 – 140,676 Chargeondisposals – – – – – (505,796) – (89) (51,908) – (557,793) Eliminationofaccumulateddepreciation againstcostonrevaluation – (313,061) – (28,800) (1,053,736) – (23,957) (179,094) – – (1,598,648) BalanceasatDecember31,2014 – 36,477 10,652 3,076 49,198 374,381 3,315 20,617 292,367 77,177 867,260

BalanceasatJanuary01,2015 – 36,477 10,652 3,076 49,198 374,381 3,315 20,617 292,367 77,177 867,260 Chargefortheyear-note21.1.3 – 109,518 8,984 5,924 427,317 112,480 8,513 49,872 16,917 14,387 753,912 Chargeondisposals – – – – – – – (688) (57,310) – (57,998) BalanceasatDecember31,2015 – 145,995 19,636 9,000 476,515 486,861 11,828 69,801 251,974 91,564 1,563,174

BookvalueasatDecember31,2014 6,777,600 1,757,601 153,370 5,924 28,882,679 1,910,404 46,947 534,395 24,234 140,135 40,233,289

BookvalueasatDecember31,2015 6,777,600 1,655,043 167,214 – 28,456,801 1,797,924 39,112 494,089 4,947 145,406 39,538,136

20.1.1 Freeholdland,buildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentwererevaluedbyanindependentvaluerM/sPirsonsChemicalEngineering(Private)LimitedonAugust31,2014.Therevaluationsurplusnetofdeferredtaxwascreditedtosurplusonrevaluationofoperatingfixedassets.Hadtherebeennorevaluation,thecarryingamountsofthefollowingclassesofassetswouldhavebeenasfollows:


Freeholdland 911,940 911,940 Buildingsonfreeholdland 1,252,700 1,336,110 Plantandmachinery 15,896,051 16,185,267 Toolsandotherequipment 334,285 322,717

18,394,976 18,756,034

20.1.2 IncludedinplantandmachineryareassetshavingcarryingamountofRs47.989millionthatareinstalledatthemanufacturingfacilitiesofthegroup’scustomersnamelyIcebergGasCompany,Coca-ColaBeveragesPakistanLimitedandPepsiCoalaInternational(Private)Limitedastheseassetsareusedforsalestothesecustomers.

20.1.3 Thedepreciationchargefortheyearhasbeenallocatedasfollows:


Costofsales -note31 549,012 202,204 Administrativeexpenses -note32 195,203 194,635 Sellinganddistributionexpenses -note33 9,697 4,634

753,912 401,473

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20.1.4 Disposal of operating fixed assets 2015 (Rupees in thousand) Accumulated

Particulars Sold to Cost depreciation Book value Sale proceeds Mode of disposal

Vehicles Ex - employees

SagheerAhmaed 899 764 135 131 AsperCompany Policy SyedBilalHassan 903 768 135 184 -do- AdnanAshraf 530 432 98 117 -do- MuhammadKamran 914 777 137 160 -do- SajidFarid 881 837 44 9 -do- QaiserAbbasKhan 914 807 107 117 -do- HafizAtta-ur-Mustafa 716 633 83 307 -do- BilalButt 1,256 1,256 – – -do- AdnanKashifUmar 934 840 94 123 -do- AbdulGhaffar 898 868 30 5 -do- AbdulKhaliqueShaukat 934 871 63 123 -do- BabarJamil 934 871 63 79 -do- ShahidMunir 942 942 – 87 -do- SadiaSharif 552 506 46 219 -do- TahirMasud 1,145 1,145 – – -do- Employees

ArifHameedDar (ChiefFinancialOfficer) 1,913 1,817 96 13 -do- MuhammadTahirSherazi 1,477 1,231 246 290 -do- M.QadeerAli 949 838 111 214 -do- MumtazAliNasir 1,125 1,125 – 18 -do- MohsanRazaHaiderHashmi 825 825 – 7 -do- SyedSaeedHasanShah 1,125 1,125 – 12 -do- TayyabAminMalik 1,297 1,297 – 12 -do- MuhammadAbidSaeed 1,297 1,297 – – -do- IqbalAwan 1,125 1,125 – – -do-

AnwarHussain 655 655 – 126 -do- Ch.M.MunirAhmad 1,297 1,297 – – -do- MArshadAshraf 825 825 – 7 -do-

FarrukhNadeemAbid 1,297 1,297 – – -do- MuhammadJamil 876 861 15 184 -do- M.Aqeel 832 832 – – -do- MuhammadZahir (DirectorMarketing) 1,940 1,908 32 – -do- IftikharMahmoodBaig (DirectorBusinessDevelopment) 1,958 1,893 65 – -do- Mati-ur-RabSiddiqui 1,481 1,481 – – -do- M.AbadKhan (AdvisortoChiefExecutiveOfficer) 1,937 1,937 – – -do-

C/F 37,584 35,983 1,600 2,544

2015 (Rupees in thousand) Accumulated


B/F 37,584 35,983 1,600 2,544

AsadAhmadJan 1,481 1,432 49 – AsperCompanyPolicy

HaqNawaz 876 876 – 13 -do-

YousafImranKhan 893 849 44 18 -do-

GhulamRasool 927 866 61 128 -do-

M.ImranHussain 893 878 15 – -do-

MuhammadYasin 899 899 – 16 -do-

AfzalHussain 899 899 – 7 -do-

MahmudShah 1,348 1,348 – 13 -do-

DanishAmanMirza 893 893 – 7 -do-

AbdulNasir 1,414 1,414 – – -do-

AusafA.Qureshi(CompanySecretary) 1,886 1,886 – – -do-

NaseerullahKhan 1,297 1,297 – 11 -do-

IftikharAhmedMalik 1,138 1,138 – 10 -do-

Employees of associated

company and related party (FATIMA)

AbdulGhani 1,478 1,256 222 188 -do-

M.TariqJaved 1,858 1,517 341 733 -do-

ShakeelAhmad 572 458 114 – -do-

MuhammadAmjad 864 864 – 180 -do-

Outside Party

Mrs.ZahiaShafqat 1,975 1,843 132 1,215 Auction

AminHafeez 715 715 – 525 Auction

Tools and other equipment

FirstHabibModaraba 18,376 – 18,376 20,604 Transferagreement

Other assets with book value less than Rs 50,000 763 689 73 394

79,028 57,998 21,027 26,606

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Vehicles Ex - employees

MuhammadSaddiqueAkbar 930 744 186 575 Aspercompanypolicy BabarShahid 899 749 150 298 -do- AdnanAnjum 1,313 1,116 197 893 -do- GhultamRazaJallaalani 1,483 1,360 123 455 -do-

C/F 4,625 3,969 656 2,221



B/F 4,625 3,969 656 2,221 MuhammadMusharafKhan 1,702 1,475 227 495 Aspercompanypolicy MohsinAzizSyed 899 749 150 211 -do- AsadMurad 2,078 1,593 485 425 -do- AsifSirhindi 1,918 1,822 96 27 -do-

Employees M.AmirShahzad 708 614 94 301 -do- MuneebHussain 716 620 96 306 -do- M.FarazArshad 899 779 120 496 -do- HafizAtta-Ur-Rehman 737 638 99 332 -do-

Employeesofassociated companyandrelatedparty(FATIMA) RafaqatAli 871 813 58 464 -do- GhulamAbbas 864 807 57 461 -do- MuhammadMazharHussain 864 807 57 460 -do- NaveedBashir 1,283 1,176 107 888 -do- JavedIqbal 1,922 1,794 128 744 -do- JaffarNazir 554 498 56 147 -do- AbdulGhaffar 714 619 95 303 -do- ZarrinAlam 547 465 82 138 -do- MuhammadSarfraz 708 602 106 303 -do- SohailAhmed 737 651 86 335 -do- ImranKhalid 554 498 56 149 -do- MuhammadImtiaz 708 637 71 308 -do- M.UmarCh 883 795 88 487 -do- ZaheerAbbas 951 840 111 332 -do- SyedUsmanKhalid 737 639 98 339 -do- MuhammadNasir 1,473 1,228 245 388 -do- Lt.Col(R)SarfarazKhan 881 778 103 178 -do- UsmanSohail 729 595 134 329 -do- MuhammadAmin 1,388 1,110 278 284 -do- MuhammadAsif 1,391 1,113 278 989 -do- KashifMustafaKhan 1,476 1,230 246 308 -do- M.Atique-Ur-Rehman 929 728 201 322 -do- TofiqueAhmed 1,541 1,233 308 434 -do-

Outside Party MianNoorHayat 1,478 1,232 246 1,200 Auction

Other assets with book value less than Rs 50,000 525,150 524,646 504 357,951

563,615 557,793 5,822 373,055

20.1.5 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthegroupisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate.

Thetablesbelowanalyzethenon-financialassetscarriedatfairvalueasatDecember31,2015andDecember31,2014.

Thedifferentlevelshavebeendefinedasfollows:- Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1).



Thefollowingtablepresentsthegroup’snon-financialassetsthataremeasuredatfairvalueatDecember31,2015.


Level 1 Level 2 Level 3 Total Recurring fair value measurements of certain items of operating fixed assets Freeholdland – 6,777,600 – 6,777,600 Buildingsonfreeholdland – – 1,655,043 1,655,043 Railwaysiding – – – – Plantandmachinery – – 28,456,802 28,456,802 Toolsandequipment – – 494,089 494,089 – 6,777,600 30,605,934 37,383,534 Thefollowingtablepresentsthegroup’snon-financialassetsthataremeasuredatfairvalueatDecember31,2014.


Level 1 Level 2 Level 3 Total Recurringfairvaluemeasurementsof certainitemsofoperatingfixedassets Freeholdland – 6,777,600 – 6,777,600 Buildingsonfreeholdland – – 1,757,601 1,757,601 Railwaysiding – – 5,924 5,924 Plantandmachinery – – 28,882,679 28,882,679 Toolsandequipment – – 534,395 534,395 – 6,777,600 31,180,599 37,958,199

Movementsoftheabovementionedassetsandsurplusonrevaluationoftheseassetshavebeendisclosedinnote20.1andnote7respectivelytothesefinancialstatements.Thegroup’spolicyistorecognisetransfersintoandtransfersoutoffairvaluehierarchylevelsasattheendofthereportingperiod.TherewerenotransfersbetweenLevels1and2&Levels2and3duringtheyearandtherewerenochangesinvaluationtechniquesduringtheyears.

Valuation techniques used to determine level 2 and level 3 fair values

Thegroupobtainsindependentvaluationsforitsfreeholdland,buildingonfreeholdland,railwaysiding,plantandmachinery,and toolsandequipments (classifiedasproperty,plantandequipment)at leastevery threeyears.At theendofeachreportingperiod, themanagementupdates itsassessmentof the fairvalueofeachassetmentionedabove, taking intoaccountthemostrecentindependentvaluation.Themanagementdeterminesanasset’svaluewithinarangeofreasonablefairvalueestimates.Level2fairvalueoffreeholdlandhasbeenderivedusingasalescomparisonapproach.Salepricesofcomparablelandincloseproximityareadjustedfordifferencesinkeyattributessuchaslocationandsizeoftheproperty.Themostsignificantinputintothisvaluationapproachispricepersquarefoot.Level3fairvalueofbuildingonfreeholdlandhasbeendeterminedusingadepreciatedreplacementcostapproach,whereby,currentcostofconstructionofasimilarbuildinginasimilarlocationhasbeenadjustedusingasuitabledepreciationratetoarriveatpresentmarketvalue.Level3fairvalueofrailwaysiding,plantandmachinery,andtoolsandequipmentshavebeendeterminedusingadepreciatedreplacementcostapproach,whereby,thecurrentreplacementcostofrailwaysiding,plantandmachinery,andtoolsandequipmentsofsimilarmake/origin,capacityandleveloftechnologyhasbeenadjustedusingasuitabledepreciationrateonaccountofnormalwearandtear.

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20.2 Capital work-in-progress

Civilworks -note20.2.1 16,192 14,334 Plantandmachinery 9,468 9,320 Advances-consideredgood -againstpurchaseofplantandmachinery 1,825 2,010 -tocontractor 175 1,174 -tosuppliers 2,559 10,508 Intangibleassetunderdevelopment-computersoftware 348 348 Others – 783

30,567 38,477

20.2.1 Thereconciliationofthecarryingamountisasfollows: Openingbalance 38,477 77,271 Additionsduringtheyear 33,603 64,088 72,080 141,359 Adjustmentsduringtheyear – (632) Transfersduringtheyear (41,513) (102,250) Closingbalance 30,567 38,477


20.3 Capital stores and stand-by equipment

Openingbalance 74,421 – Additionsduringtheyear 19,378 74,421

93,799 74,421 Transfersduringtheyear (38,035) –


21. Assets subject to finance lease

Theserepresentvehiclesleasedbythegroup.

COST

Openingbalance – 161,879 Transfertooperatingfixedassetsduringtheyear – (161,879) Closingbalance – –

DEPRECIATION

Openingbalance – 111,248 Chargefortheyear -note21.1 – 29,428 Transfertooperatingfixedassetsduringtheyear – (140,676) Closingbalance – –

Closingbookvalue – –

Annualdepreciationrate% – 20

21.1 Thedepreciationchargefortheyearhasbeenallocatedasfollows: Costofsales -note31 – 4,540 Administrativeexpenses -note32 – 13,840 Sellinganddistributionexpenses -note33 – 11,048 – 29,428

Valuation inputs and relationship to fair value

Thefollowingtablesummarisesthequantitativeandqualitativeinformationaboutthesignificantunobservableinputsusedinrecurringlevel3fairvaluemeasurements.Seeparagraphaboveforthevaluationtechniquesadopted.

Significant Quantitative Data / Range Description Unobservable and relationship to the

2015 2014 inputs fair value

Buildingsonfreeholdland 1,655,043 1,757,601 Costofconstruction Themarketvaluehasbeen ofanewsimilarbuilding. determinedbyusingadepreciation factorofapproximately10%-15%on costofconstructingasimilarnew building.Higher,theestimatedcost ofconstructionofanewbuilding,

higherthefairvalue.Further,higher thedepreciationrate,thelowerthe fairvalueofthebuilding.

Railwaysiding – 5,924 Costofacquisition Themarketvaluehasbeen ofsimilarrailwaysiding determinedbyusingcostof withsimilarlevelof acquisitionofsimilarrailwaysiding technology. withsimilarleveloftechnologyand applyingasuitabledepreciation Suitabledepreciationrate factorbasedonremaininguseful toarriveatdepreciated lifeofrailwaysiding.Remaining replacementvalue. usefullifehasbeenestimatedto benil.Thehigherthecostof acquisitionofsimilarrailwaysiding, higherthefairvalueofrailway siding.Further,higherthe depreciationrate,thelowerthefair valueofrailwaysiding. Plantandmachinery 28,456,802 28,882,679 Costofacquisitionof Themarketvaluehasbeen similar plant andmachinery determinedbyusingcostof withsimilarlevelof acquisitionofsimilarplantand technology. machinerywithsimilarlevelof echnologyandapplyingasuitablet Suitabledepreciationrate depreciationfactorbasedon toarriveatdepreciated remainingusefullivesofplantand replacementvalue. machinery.Remainingusefullives havebeenestimatedfrom20to 25years.Thehigherthecostof acquisitionofsimilarplantand machinery,higherthefairvalueof plantandmachinery.Further,higher thedepreciationrate,thelowerthe fairvalueofplantandmachinery. Toolsandotherequipment 494,089 534,395 Costofacquisitionof Themarketvaluehasbeen similartoolsandequipmentdeterminedbyusingcostof withsimilarlevelof acquisitionofsimilartoolsand technology. equipmentwithsimilarlevelof technologyandapplyingasuitable Suitabledepreciationrate depreciationfactorbasedon toarriveatdepreciated remainingusefullivesoftoolsand replacementvalue. equipment.Remainingusefullives havebeenestimatedfrom4to25 years.Thehigherthecostof acquisitionofsimilartoolsand equipment,higherthefairvalueof toolsandequipment.Further,higher thedepreciationrate,thelowerthe fairvalueoftoolsandequipment.

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(Rupees in thousand) Computer Mining rights Total software 22. Intangible assets COST BalanceasatJanuary01,2014 33,586 210,000 243,586 Additionsduringtheyear 10,654 – 10,654 BalanceasatDecember31,2014 44,240 210,000 254,240 BalanceasatJanuary01,2015 44,240 210,000 254,240 Additionsduringtheyear 607 – 607 BalanceasatDecember31,2015 44,847 210,000 254,847 AMORTIZATION BalanceasatJanuary01,2014 8,179 91,000 99,179 Chargefortheyear -note22.2 8,662 21,000 29,662 BalanceasatDecember31,2014 16,841 112,000 128,841 BalanceasatJanuary01,2015 16,841 112,000 128,841 Chargefortheyear -note22.2 10,717 21,000 31,717 BalanceasatDecember31,2015 27,558 133,000 160,558 BookvalueasatDecember31,2014 27,399 98,000 125,399 BookvalueasatDecember31,2015 17,289 77,000 94,289 Annualamortizationrate% 25 10

22.1 MiningrightsrepresentrightsacquiredforextractionofrockphosphatefromablockofareainDistrictAbbottabadforatenyearsperiodendingonAugust11,2019.TheaforesaidareaisinthepossessionandcontrolofPakistanMiningCompanyLimited(‘PMCL’),arelatedparty(associatedcompany),whichprovidesrockphosphateextractionservicestothegroupaspertheServicesAgreement.


22.2 Theamortizationchargefortheyearhasbeenallocatedasfollows:

Costofsales(includedinrawmaterialsconsumed) 21,000 21,000 Administrativeexpenses -note32 10,717 8,662

31,717 29,662

23. Goodwill

Thisrepresentsgoodwillonamalgamationasreferredtoinnote16tothesefinancialstatements.

Impairmenttestingofgoodwillhasbeencarriedoutbyallocatingtheamountofgoodwilltorespectiveassetsonwhichitarose.TherecoverableamountoftheCashGeneratingUnithasbeendeterminedbasedonavalueinusecalculation.Thiscalculationusescashflowprojectionsbasedonfinancialbudgetsapprovedbymanagementcoveringafive-yearperiodthathavebeendiscountedusingadiscountrateof14.21%.Thecashflowsbeyondthefive-yearperiodareextrapolatedusinganestimatedgrowthrateof4%whichisconsistentwiththelong-termaveragegrowthrateforthefertilizerindustry.TherecoverableamountcalculatedbasedonvalueinuseexceededcarryingvaluebyRs23,841million.Alongterm/terminalgrowthrateof-5.50%orariseindiscountrateto21.13%would,allchangestakeninisolation,resultintherecoverableamountbeingequaltothecarryingamount.

Theabovecashflowprojectionsareprincipallybasedontheassumptionthatgassupplywouldcontinuetothegroup.During

thepreviousthreeyears,thefertilizeroperationshasfacedgasshortagesthatresultedinlosses.However,duringthecurrentyear, thegroup startedpurchasingRegasified LiquefiedNaturalGas (‘RLNG’) fromPSOdue towhich itsplantoperatedfor273days resulting inprofit for thecurrentyear.PSOhad imported suchLiquefiedNaturalGas (‘LNG’) fromQatargas.

Management’sassumptionofcontinuityingassupplytothefertilizeroperations’plantisbasedonthelongtermagreementforimportofLNGsignedbetweentheGovernmentofPakistanandQatargas.


24. Long term investments

Held to maturity (not due to mature within next twelve months): -Other -note24.1 43,278 38,589 Associate - unquoted: MultanRealEstateCompany(Private)Limited 642,321(2014:642,321)fullypaidordinarysharesofRs100each Equityheld29.55%(2014:29.55%) BookvaluepershareRs100.04(2014:Rs99.8) -note24.2 64,232 64,232

107,510 102,821

24.1 Investment - Other

ThisrepresentsDefenceSavingCertificatesissuedforaperiodoftenyears,whichwillmatureonSeptember11,2019.Yieldtomaturityonthesecertificatesis12.15%.ThesecertificateshavebeenpledgedassecuritywiththeDirectorGeneral,Mines&Minerals,GovernmentofKhyberPakhtunkhwaasperthetermsoftheminingagreement.

24.2 Associate - unquoted

ThisrepresentsinvestmentintheordinarysharesofMultanRealEstateCompany(Private)Limited(‘MREC’).ThemainbusinessofMRECisestablishinganddesigninghousingandcommercialschemes,tocarryonbusinessofcivilengineersforconstructionofprivateandgovernmentalbuildingsandinfrastructureandprovisionoflaborandbuildingmaterial

Theinvestmentismeasuredatcostastheassociatehasnotyetstarteditscommercialoperationsandthebreakupvalueforthepurposesofequitymethodisnotsignificantlydifferentfromcost.

Thegroup’sshareof theresultof itsassociate,which is incorporated inPakistan,and its shareof theassets, liabilitiesand

revenuebasedonun-auditedfinancialstatementsasatDecember31,2015isasfollows:

Percentage (Rupees in thousand) Name interest held Assets Liabilities Revenue Loss MultanRealEstateCompany (Private)Limited 29.55% 217,542 105 – 154


25. Stores and spare parts

Chemicalsandcatalysts -note25.1 857,570 898,595 Stores 114,625 121,376 Spareparts[includingintransitRs37.598million (2014:Rs23.112million)] 1,677,407 1,694,948 2,649,602 2,714,919 Provisionforobsoleteitems (76,224) (76,224)

2,573,378 2,638,695

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25.1 Includedinchemicalsandcatalystsisplatinum,rhodiumandpalladiumofRs80.327million(2014:Rs57.042million)heldbyJohnsonMattheyPublicLimitedCompany,UnitedKingdomonbehalfofthegroupforrefiningpurposes.


26. Stock-in-trade

Rawmaterials[includingintransitofRs24.197million (2014:Rs16.972million)] -note26.2 753,458 557,403 Packingmaterials 34,895 32,335 Midproducts 154,189 19,709 Work-in-process 25,664 34,023 Finishedgoods: -Ownmanufactured: Fertilizers -note26.3 4,733,699 8,909 Emissionreductions -note26.4 – 317 Polypropylenesacksandcloth 3,930 4,851 4,737,629 14,077 -Fertilizerpurchasedforresale 2,193,497 336,387

7,899,332 993,934

26.1 RawmaterialsandfinishedgoodsamountingtoRs4,521.267million(2014:Rs423.610million)arepledgedwith lendersassecurityagainstshorttermborrowingsasreferredtoinnote15.1.

26.2 IncludesrockphosphateamountingtoRs64.396million(2014:Rs52.546million)whichisinthepossessionofPMCL(relatedparty-associatedcompany).TherockphosphateinpossessionofPMCLisduetothereasonexplainedinnote22.1tothesefinancialstatements.

26.3 Includesgroup’sfertilizerproduct,NitroPhosphate(‘NP’),amountingtoRs5.748million(2014:Nil)whichis inpossessionofFATIMA,arelatedparty(associatedcompany),forstoragepurposeasitsharesstoragespaceincertainareas.

26.4 ThisrepresentsemissionreductionscostingRs37.137million(2014:Rs37.137million)carriedattheirNetRealizableValue(‘NRV’)amountingtoNil(2014:Rs0.317million).TheNRVwritedownexpenseofRs0.317million(2014:Rs36.820million)hasbeenchargedtocostofsales.


27. Trade debts

Consideredgood: -Secured(bywayofbankguaranteesandsecuritydeposits) -note27.1 2,507,978 85,878 -Unsecured -note27.2 285,192 319,820

2,793,170 405,698

27.1 Theseareinthenormalcourseofbusinessandcertaindebtscarryinterestrangingfrom9.02%to12.52%perannum.

27.2Includethefollowingamountsduefromrelatedparties(associatedcompanies):


FatimaFertilizerCompanyLimited 64,343 49,278 FatimaSugarMillsLimited 23,270 22,519 RelianceWeavingMillsLimited 3,262 872 RelianceCommodities(Private)Limited 14,018 30,359 FazalClothMillsLimited 43 957 FazalRehmanFabricsLimited 8 8 FatimafertLimited(previouslyDHFertilizersLimited) 466 – 105,410 103,993

Theageanalysisoftradedebtsduefromrelatedpartiesisasfollows: Neitherpastduenorimpaired 80,396 69,676 Pastduebutnotimpaired: 1to30days 21,701 25,389 31to60days – 8,920 Above60days 3,313 8 105,410 103,993


28. Advances, deposits, prepayments and other receivables

Advances-consideredgood: -Toemployees -note28.1 11,054 11,753 -Tosuppliers -note28.2 1,716,123 88,953 Tradedeposits – 100 Prepayments 165,948 9,719 Interestreceivableonbankdeposits 992 1,702 Balanceswithstatutoryauthorities: -Salestax -consideredgood -note28.3 2,216,408 – -considereddoubtful 8,911 8,911

2,225,319 8,911 -Incometaxrecoverable 3,861,925 3,133,699 -Customdutyrecoverable 9,812 9,812 -Exportrebaterecoverable 1,663 1,497 Lettersofcredit-margins,deposits,openingchargesetc. 248 – Securitydeposits -note28.4 23,662 644,134 ReceivablefromGovernmentofPakistan -note28.5 1,302,429 – Otherreceivables-consideredgood 105,902 83,095

9,425,077 3,993,375 Provisionfordoubtfulreceivable (8,911) (8,911)

9,416,166 3,984,464

28.1 IncludedinadvancestoemployeesareamountsduefromexecutivesofRs7.503million(2014:Rs7.845million).

28.2 IncludesanamountofRs26.741million(2014:Rs27.684million)andRs5.895million(2014:Nil)asadvancestorelatedparties,PMCL(associatedcompany)andSNGPL(associatedcompany)respectively.

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28.3 IncludesRs134.022millionwhichprimarilyrepresentstheinputsalestaxpaidbythegroupinrespectofrawmaterialsacquiredbeforeJune11,2008onwhichdatefertilizerproductsmanufacturedbythegroupwereexemptedfromlevyofsalestaxthroughnotification SRO535(I)/2008. Theamount stood refundable to thegroup therebeingnooutput sales tax liabilityremainingpayableonfertilizerproductsmanufacturedbythegroupagainstwhichsuchinputsalestaxwasadjustable.Thegroup’sclaimofrefundonthisaccountwasnotentertainedbyFederalBoardofRevenue(‘FBR’)onthepremisethatsincesubjectrawmaterialsweresubsequentlyconsumedinmanufactureofaproductexemptfromlevyofsalestax,claimwasnotinaccordancewiththerelevantprovisionsoftheSalesTaxAct,1990.

Group’smanagementbeingaggrievedwiththeinterpretationadvancedbyFBRontheissuehaspreferredawritpetitionbefore theLahoreHighCourt,whichhasnotyetbeendisposedoff. Sincegroup’smanagementconsiders thatclaimofrefundiscompletelyinaccordancewithrelevantstatutoryframeworkandexpectsrelieffromappellateauthoritiesonthisaccount,itconsidersthatthereceivableamountwasunimpairedatthebalancesheetdate.

28.4 IncludesanamountofNil(2014:Rs630million)depositedwithSindhHighCourt,inrespectofsuitfiledbythegroupinrelationtoproposedacquisitionofDHFertilizersLimited(‘DHFL’,nowFatimafertLimited).

DuringtheyearendedDecember31,2012,thegroupsignedaMemorandumofUnderstanding(MoU)withDawoodHercules

CorporationLimited(‘DHCorp’)forthepurchaseof itsentireshareholding(100millionordinarysharesofRs10each)initswhollyownedsubsidiary,DHFL.However, theBoardofDirectorsofDHCorp in theirmeetingheldonDecember10,2012decidedthatitdidnotintendtopursuethetransactionforcommercialreasons.Subsequently,thegroupfiledasuitagainstDHCorpinSindhHighCourt(the‘Court’)fortheenforcementofthesaidMoU.

Duringtheyear,thegroupandDHCorpreachedanoutofcourtsettlementforthesaidsuitwherebyDHCorpagreedtofulfil itsobligationaspertheMoUbyselling itsentireshareholding inDHFLtothegroup.Consequently, thegroupfiledanapplicationfordismissaloftheaforesaidsuitwhichwasdulyacceptedbytheCourtvideitsorderdatedJune18,2015andthecompleteamountofdepositwasrefundedtothegroup.Furthermore,asperthesettlement,thegroupandDHCorpenteredintoa‘SharePurchaseAgreement’foracquisitionofentireshareholdingofDHFLonJune15,2015.However,owingtothegroup’sfinancialposition,itsBoardofDirectorsassignedtheacquisitionrights,benefitsandobligationsundertheSharePurchaseAgreementtoFATIMA,arelatedparty(associatedcompany).

28.5 During the year, theGovernmentof Pakistan notified thepaymentof subsidyat the rateof Rs 500per 50 kgbagofDiAmmoniumPhosphate(‘DAP’)andRs217per50kgbagofNPsold.TheamountofsubsidywillbepaidtothegroupuponverificationbytheFederalBoardofRevenue.


29. Cash and bank balances

Atbankson: -Savingaccounts -notes29.1&29.2 382,090 1,314,132 -Currentaccounts -note29.2 143,758 109,665 525,848 1,423,797 Inhand 4,972 5,165

530,820 1,428,962

29.1 Profitonbalancesinsavingaccountsrangesfrom4%to9%perannum.

29.2 IncludedinsavingaccountsisanamountofRs217.379million(2014:Rs274.314million)whichbearsmarkupattherateof5.75%perannumandincludedincurrentaccountsisanamountofRs7.158million(2014:Rs5.473million),bothplacedwithSummitBankLimited,arelatedparty(associatedcompany).


30. Sales

Fertilizerproducts: -Ownmanufactured 16,193,646 5,790,966 -Purchasedforresale 6,307,780 10,794,959

22,501,426 16,585,925

SubsidyfromGovernmentofPakistan -note28.5 1,302,429 – Midproducts 542,280 287,264 Rockphosphate 40,107 85,695 1,884,816 372,959

Salesoffertilizeroperations 24,386,242 16,958,884

Polypropylenesacksandcloth -note30.1 1,283,617 1,594,130 Exportsales 2,177 37,869 Exportrebate 232 1,128 Salesofsacksoperations 1,286,026 1,633,127

25,672,268 18,592,011 Less: Salestax 2,266,129 2,748,636 Salesincentive 384,331 187,382 2,650,460 2,936,018

23,021,808 15,655,993


30.1 Includessalestothefollowingrelatedparties(associatedcompanies): FatimaFertilizerCompanyLimited 639,731 785,895 FatimaSugarMillsLimited 55,401 45,083 RelianceWeavingMillsLimited 4,591 9,461 RelianceCommodities(Private)Limited 18,749 34,846 FazalClothMillsLimited 2,486 2,845 FazalRehmanFabricsLimited – 239 FatimafertLimited(previouslyDHFertilizersLimited) 27,418 –

748,376 878,369

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31. Cost of sales

Rawmaterialconsumed -note31.1&31.2 12,652,716 2,781,465 Packingmaterialconsumed 4,817 4,429 Linersconsumed 290,050 273,923 Linerinsertioncost 21,747 15,653

12,969,330 3,075,470 Salaries,wagesandotherbenefits -note31.3 703,527 538,324 Fuelandpower -note31.4 2,461,501 710,373 Chemicalsandcatalystsconsumed 408,497 7,950 Sparepartsconsumed 151,981 100,621 Storesconsumed 55,782 30,775 Travellingandconveyance 2,133 2,143 Telephone,telexandpostage 182 199 Stationery,printingandperiodicals 336 7 Repairsandmaintenance 73,714 141,524 Rent,ratesandtaxes -note31.5 2,587 2,178 Insurance 132,438 158,279 Vehiclerunningexpenses 1,700 1,390 Entertainment 1,870 278 Depreciationonoperatingfixedassets -note20.1.3 549,012 202,204 Depreciationonassetssubjecttofinancelease -note21.1 – 4,540 Tollmanufacturingchargesandfreight -note31.6 726,671 982,880 Utilities -note31.5 81,486 56,421 Feesandsubscription 1,475 273 Others -note31.7 40,522 29,746

18,364,744 6,045,575

Openingstockofmidproductsandwork-in-process 53,732 72,006 Closingstockofmidproductsandwork-in-process (179,853) (53,732)

(126,121) 18,274

Costofgoodsmanufactured 18,238,623 6,063,849

Openingstockoffinishedgoods 14,077 25,133 Closingstockoffinishedgoods (4,737,629) (14,077)

(4,723,552) 11,056

Costofgoodssold-ownmanufactured 13,515,071 6,074,905 Costofgoodssold-purchasedforresale 4,717,769 7,345,042

18,232,840 13,419,947

31.1 IncludesfeedgasconsumedofNil(2014:Rs745.024million)purchasedfromSNGPL,arelatedparty(associatedcompany).

31.2 IncludesexpensesofRs43.459million(2014:Rs81.529million)forextractionofrockphosphatebyPMCL,arelatedparty(associatedcompany),asexplainedinnote22.1tothesefinancialstatements.



Salaries,wagesandotherbenefitsincludethefollowinginrespectofretirementbenefits:

Gratuity

Currentservicecost 15,792 15,969 Interestcostfortheyear 7,425 7,560 Expectedreturnonplanassets (6,492) (6,274)

16,725 17,255


12,635 826

Inadditiontotheabove,salaries,wagesandotherbenefits includeRs13.215million(2014:Rs12.332million) inrespectofprovidentfundcontributionbythegroup.

31.4 IncludesfuelgasconsumedofRs46.907million(2014:Rs644.746million)purchasedfromSNGPL,arelatedparty(associatedcompany).

31.5 IncludesexpenseschargedbyFATIMA,arelatedparty(associatedcompany): 2015 2014 (Rupeesinthousand)

Rentagainstleaseofland 699 639 Utilities 81,486 56,421

82,185 57,060

31.6 This includes processing services of Rs 658.842million (2014: Rs 976.416million) availed from FATIMA, a related party (associatedcompany).


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32. Administrative expenses

Salaries,wagesandotherbenefits -note32.1 310,436 208,035 Travellingandconveyance 15,647 13,274 Telephone,telexandpostage 14,634 14,144 Stationery,printingandperiodicals 5,323 7,898 Rent,ratesandtaxes -note32.2 60,405 39,476 Feeandsubscription 493 87 Repairsandmaintenance 50,130 28,768 Aircraftoperatingexpenses -note32.3 123,160 111,764 Insurance 13,764 18,036 Legalandprofessionalcharges -note32.4 24,128 14,931 Vehiclerunningexpenses 3,441 2,302 Entertainment 7,765 3,678 Advertisement 635 462 Depreciationonoperatingfixedassets -note20.1.3 195,203 194,635

Depreciationonassetssubjecttofinancelease -note21.1 – 13,840 Amortizationonintangibleassets -note22.2 10,717 8,662 Others 57,269 61,381 -note32.5 893,150 741,373



Salaries,wagesandotherbenefitsincludefollowinginrespectofgratuity:

Gratuity

Currentservicecost 5,325 5,466 Interestcostfortheyear 2,503 2,589 Expectedreturnonplanassets (2,189) (2,148) Amountchargedtorelatedparty (1,108) (1,055)

4,531 4,852

Accumulating compensated absences

Currentservicecost 3,060 1,338 Interestcostfortheyear 1,539 649 Remeasurements 199 (1,544)

4,798 443

Inaddition to theabove, salaries,wagesandotherbenefits includeRs 5.302million (2014: Rs 5.222million) in respectofprovidentfundcontributionbythegroup.


32.3 IncludesexpensesofRs35.120million(2014:Rs31.090million)forflyingandmaintenanceservicesofthegroup’saircraftbyAirOne(Private)Limited,arelatedparty(associatedcompany)aspertheServicesAgreement.


32.4 Professional services

Thechargesforprofessionalservicesincludethefollowing inrespectofauditors’servicesfor: -Statutoryaudit 3,470 3,385 -Taxservices 16,529 625 -Assuranceandothercertificationservices – 160 -Outofpocketexpenses 179 285

20,178 4,455

32.5 IncludesamountofRs189.383million (2014:Rs105.187million)which representscommoncostschargedto thegroupbyFATIMA,arelatedparty(associatedcompany)aspertheExpenseSharingAgreement.Also,theamountisnetofRs81.111million(2014:Rs74.205million)whichrepresentscommoncostschargedbythegrouptoFATIMA,arelatedparty(associatedcompany)aspertheExpenseSharingAgreement.


33. Selling and distribution expenses

Salaries,wagesandotherbenefits -note33.1 120,228 16,576 Travellingandconveyance 10,824 2,616 Telephone,telexandpostage 6,806 782 Stationery,printingandperiodicals 1,745 184 Rent,ratesandtaxes -note33.2 40,662 3,273 Repairsandmaintenance 5,007 995 Insurance 3,190 846 Vehiclerunningexpenses 7,705 2,300 Entertainment 3,966 523 Advertisementandsalepromotion 148,982 15,566 Depreciationonoperatingfixedassets -note20.1.3 9,697 4,634 Depreciationonassetssubjecttofinancelease -note21.1 – 11,048 Transportationandfreight 542,016 640,234 Feesandsubscription 130 125 Utilities 1,066 236 Technicalservices – 93 Others 7,665 126

-note33.3 909,689 700,157


Salaries,wagesandotherbenefitsincludethefollowinginrespectofretirementbenefits:

Gratuity

Currentservicecost 9,981 9,744 Interestcostfortheyear 4,692 4,613 Expectedreturnonplanassets (4,103) (3,830) Amountchargedtorelatedparty (7,196) (8,185)

3,374 2,342

Accumulating compensated absences

Currentservicecost 4,851 8,005 Interestcostfortheyear 2,439 3,885 Remeasurements 315 (9,234)

7,605 2,656

Inaddition to theabove, salaries,wagesandotherbenefits includeRs 9.901million (2014: Rs 8.815million) in respectofprovidentfundcontributionbythegroup.

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33.3 Includesamountof Rs 137.458million (2014: Rs 23.308million)which representscommoncostscharged to thegroupbyFATIMA,arelatedparty(associatedcompany)aspertheExpenseSharingAgreement.Also,theamountisnetofRs437.373million(2014:Rs378.513million)whichrepresentscommoncostschargedbythegrouptoFATIMA,arelatedparty(associatedcompany)aspertheExpenseSharingAgreement.


34. Finance cost

Interest/markupon: -PPTFCs-secured – 115,223 -Financeleases – 740 -Shorttermborrowings-secured -note34.1 861,518 602,618 -Longtermloanfromrelatedparties-unsecured -note34.2 143,592 – -Longtermloans-secured 188,022 277,120 -Syndicatedtermfinance-secured – 12,775 -Shorttermloanfromrelatedparty-secured -note34.3 296,779 368,384 -Workers’ProfitParticipationFund -note17.4 695 186 Loanarrangementfeesandothercharges 605 4,551 Commissiononletterofcredit 137,090 141,471 Amortisationoftransactioncost -note8.2.7 482 – Bankcharges 84,492 28,680 LatepaymentsurchargeonunpaidGIDC – 132,159

1,713,275 1,683,907

34.1 IncludesinterestexpenseofRs36.916million(2014:Rs45.864million)onaccountofrunningfinancefacilityavailedfromarelatedparty,SummitBankLimited(associatedcompany).


34.2 This relates to the following related parties:

FatimaHoldingsLimited(associatedcompany) 15,931 – RelianceCommodities(Private)Limited(associatedcompany) 41,057 – MemberandChairman’sspouse 33,402 – Chairman’schildren 5,067 – Directors 48,135 –

143,592 –

34.3 This relates to related party, FATIMA (associated company).

35. Other expenses

Donations -note35.1 20,947 1,431 Advanceswrittenoff 2,218 – Exchangeloss 231,507 – Workers’profitparticipationfund -note17.4 67,543 8,763 Workers’welfarefund 25,664 3,328

347,879 13,522

35.1 Followingistheinterestofthedirectorsinthedoneeforthisyear’sdonation: Name and address of donee Directors Interest in donee

MukhtarA.SheikhTrust,2ndFloor, Mr.FawadAhmadMukhtar& Trustees TrustPlaza,L.M.QRoad,Multan. Mr.FaisalAhmadMukhtar


36. Other income

Income from financial assets:

Incomeonbankdeposits -note36.1 61,589 24,445 Unrealisedgainoninvestmentheldtomaturity 4,689 4,181 Mark-uponcreditsaleoffertilizers 1,517 10,392 Exchangegain – 77,483

67,795 116,501 Income from non-financial assets:

Rentalincome -note36.2 17,486 24,141 Profitondisposalofoperatingfixedasset 5,579 367,232 Scrapsalesandsundryincome -note36.3 24,517 32,460 Gainonrecoveryofchemicalcatalysts – 200,607 Provisionsandunclaimedbalanceswrittenback -note36.4 148,465 21,154 Incomefrombiologicallaboratory 4,636 4,055 Profitondisposalofchemicalcatalysts – 165,320 Excessinsurancepremiumrefunded 64,205 108,940

264,888 923,909

332,683 1,040,410

36.1 IncludesinterestincomeofRs7.360million(2014:Rs16.328million)onaccountofsavingaccountwithSummitBankLimited,arelatedparty(associatedcompany).

36.2 Includesrentalincomeforvehiclesinuseofandaccomodationprovidedtotheemployeesofthefollowingrelatedparties(associatedcompanies):


FATIMA 64 10,341 FatimaEnergyLimited 996 –

RelianceWeavingMillsLimited 3,452 –

4,512 10,341

36.3 IncludesanamountofRs1.084million(2014:Nil)inrespectofscrapsalestoFATIMA,arelatedparty(associatedcompany).

36.4 IncludesanamountofRs132.159million(2014:Nil)inrespectoflatepaymentsurchargeonGIDCpayable,writtenbackduringtheyearrelatingtotheperiodbeforetheenactmentofGIDCAct,2015.

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37. Taxation

Current tax -Fortheyear 217,411 161,902 -Prioryears 21,215 –

238,626 161,902 Deferred -note13 (1,585,277) (100,924)

(1,346,651) 60,978

2015 2014 %age %age

37.1 Tax charge reconciliation

Numericalreconciliationbetweentheaverageeffectivetaxrate andtheapplicabletaxrate Applicabletaxrate 32.00 33.00 Taxeffectofamountsthatare: Notdeductiblefortaxpurposes 3.26 7.77 Nottaxableunderthelaw (33.13) – Chargeableatlowerrateoftax (0.44) (0.35) Chargeableatdifferentrateoftax 0.07 (0.91) Allowableastaxcredit (0.01) (2.44) Effectofchangeintaxrate (67.51) 2.00 Effectofchangeinprioryears’tax (41.32) 5.28 (139.08) 11.35

Averageeffectivetaxrate (107.08) 44.35


38. Cash generated from operations

Profitbeforetaxation 1,257,658 137,497

Adjustmentsfornon-cashchargesandotheritems: -Depreciationonoperatingfixedassets 753,912 401,473 -Depreciationonleasedassets – 29,428 -Amortizationonintangibleassets 31,717 29,662 -Retirementbenefitsaccrued 57,972 37,614 -Profitondisposalofoperatingfixedassets (5,579) (367,232) -Provisionsandunclaimedbalanceswrittenback (148,465) (21,154) -Financecost 1,713,275 1,683,907 -Incomeonbankdeposits (61,589) (24,445) -Unrealisedgainoninvestmentheldtomaturity (4,689) (4,181) -Exchangeloss/(gain) 231,507 (77,483) -Advanceswrittenoff 2,218 – -Gainonrecoveryofchemicalcatalysts – (200,607)

Profitbeforeworkingcapitalchanges 3,827,937 1,624,479

Effectoncashflowduetoworkingcapitalchanges -Decreaseinstoresandspareparts 65,317 410,203 -Increaseinstock-in-trade (7,021,568) (36,051) -Increaseintradedebts (2,387,472) (71,172) -Increaseinadvances,deposits,prepaymentsandotherreceivables (4,706,404) (565,462) -Increaseintradeandotherpayables 2,278,874 3,809,596 (11,771,253) 3,547,114

(7,943,316) 5,171,593


39. Cash and cash equivalents

Shorttermborrowings -note15 (15,451,553) (4,920,913) Cashandbankbalances -note29 530,820 1,428,962

(14,920,733) (3,491,951)

40. Transactions with related parties

Therelatedpartiescompriseassociatedundertakings,otherrelatedparties,keymanagementpersonnelandpostemploymentbenefitplans.Thegroupinthenormalcourseofbusinesscarriesouttransactionswithvariousrelatedparties.Amountsduefromanddue to relatedpartiesare shownunder receivablesandpayablesand remunerationof the keymanagementpersonnel is disclosed in note 41. Significant related party transactions have beendisclosed in respective notes in thesefinancialstatementsexceptforthefollowing:

2015 2014 Relationship with the group Nature of transactions (Rupeesinthousand)

i.Associatedundertakings Saleofgoodsandservices – 170,321 Purchaseofgoods 88,986 13,247

ii.Postemploymentbenefitplans Expensechargedinrespectof 61,335 60,058 retirementbenefitplans

41. Remuneration of Chief Executive, Directors and Executives

41.1 Theaggregateamountchargedinthefinancialstatementsfortheyearforremuneration,includingcertainbenefits,totheChiefExecutive,DirectorsandExecutivesofthegroupisasfollows:

ChiefExecutive ExecutiveDirectors Non-ExecutiveDirectors Executives

2015 2014 2015 2014 2015 2014 2015 2014 (Rupeesinthousand)

Short term employee benefits

Managerialremuneration – – – – 5,673 6,000 329,956 291,105 Bonus – – – – – – 1,042 883 Housingrent – – – – – – 109,327 97,177 Utilities – – – – – – 24,295 21,595 Conveyance – – – – – 240 24,295 21,595 Medicalexpenses – – – – 567 – 9,868 16,428 Leavepassage – – – – 945 1,000 38,169 35,031 Reimbursableexpenses – – – – – – 1,283 1,328 Others – – – – – – 17,715 8,875

– – – – 7,185 7,240 555,950 494,017 Post employment benefits

Contributiontoprovidentand gratuityfunds – – – – – – 42,155 36,985

Other long term benefits

Accumulatingcompensatedabsences – – – – – – 44,358 37,286

– – – – 7,185 7,240 642,463 568,288

Number of persons 1 1 1 1 6 6 236 213

Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2015Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2015Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2015

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41.2 Thegroupalsoprovides thechiefexecutive,directorsand someof itsexecutiveswithcompanymaintainedcars, travelfacilitiesandclubmembership.

2015 2014

42. Capacity and production

Urea Ratedproductioncapacity M.Tons 92,400 92,400 Actualureaproduced M.Tons – 6,789 NilproductionofUREAisattributabletohighcostofproductionas comapredtootherfertilizerproducts.Thegroupintendstoresume productionofUREAnextyearasitexpectsthatthepriceofRLNG willdecreaseinfuture. Nitro Phosphate (NP)

Ratedproductioncapacity M.Tons 304,500 304,500 ActualNPproduced M.Tons 265,349 44,684

ThelowproductionofNPisduetoshortageoffeedgasand periodicalmaintenance. CalciumAmmoniumNitrate(CAN) Ratedproductioncapacity M.Tons 450,000 450,000 ActualCANproduced M.Tons 287,954 55,432 ThelowproductionofCANisduetoshortageoffeedgasand periodicalmaintenance. Polypropylenesacks Ratedproductioncapacity Kilograms 5,280,000 5,280,000 Actualproduction Kilograms 5,154,779 5,041,442 Thelowproductionofpolypropylenesacksisduetotheproductmix.

43. Disclosures relating to Provident Fund

Thegroupoperatestwoprovidentfunds:

(i) Employees’ProvidentFundTrustLahore

(ii) Employees’ProvidentFundTrustMultan ThefollowinginformationisbasedontheauditedfinancialstatementsoftheFundsasatJune30,2015and2014:


SizeoftheFund-totalassets 350,297 315,758 Costofinvestmentsmade 270,528 225,735 Percentageofinvestmentsmade 86% 79% Fairvalueofinvestments 300,566 249,102 Break up of investments Specialaccountsinascheduledbank 199,028 207,735 Mutualfunds-listed 101,539 41,367

2015 2014 %ageofsizeoftheFund

Break up of investments Specialaccountsinascheduledbank 57% 66% Mutualfunds-listed 29% 13% InvestmentsoutofProvidentFundshavebeenmadeinaccordancewiththeprovisionsofsection227oftheCompaniesOrdinance,

1984andtherulesformulatedforthispurpose.

44. Financial risk management

44.1 Financial risk factors

Thegroupisexposedtoavarietyoffinancialrisks:marketrisk(includingcurrencyrisk,otherpriceriskandinterestraterisk),credit risk and liquidity risk. Thegroup’s overall riskmanagement programme focuses on the unpredictability of financialmarketsandseekstominimisepotentialadverseeffectsonthefinancialperformance.

Riskmanagementiscarriedoutbythegroup’sBoardofDirectors(theBoard).Thegroup’sfinancedepartmentevaluatesand

hedgesfinancialrisks.TheBoardprovideswrittenprinciplesforoverallriskmanagement,aswellaswrittenpoliciescoveringspecificareas, suchas foreignexchange risk, interest rate risk,credit risk, useofderivative financial instrumentsandnon-derivativefinancialinstruments,andinvestmentofexcessliquidity.

a) Market risk i) Currency risk

Currencyriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinforeignexchangerates.Currencyriskarisesmainlyfromfuturecommercialtransactionsorreceivablesandpayablesthatexistduetotransactionsinforeigncurrencies.

Thegroupisexposedtocurrencyriskarisingfromvariouscurrencyexposures,primarilywithrespecttotheUnitedStatesDollar

(USD)andEuro.Currently,thegroup’sforeignexchangeriskexposureisrestrictedtobankbalancesandamountsreceivablefrom/payabletotheforeignentities.


Amountpayable-USD 19,601,027 42,583,465 Cashandbankbalances-USD (11,627) (151,586) Netliabilityexposure-USD 19,589,400 42,431,879

Amountpayable-Euro – – Cashandbankbalances-Euro (5,095) (364,906) Netassetexposure-Euro (5,095) (364,906)

AtDecember31,2015iftheRupeehadweakened/strengthenedby5%againsttheUSDwithallothervariablesheldconstant,theimpactonpretaxprofitfortheyearwouldhavebeenRs100.885million(2014:Rs214.705million)lower/higher,mainlyasaresultofexchangelosses/gainsontranslationofUSDdenominatedfinancialinstruments.

AtDecember31,2015iftheRupeehadweakened/strengthenedby5%againsttheEurowithallothervariablesheldconstant,

theimpactonpretaxprofitfortheyearwouldhavebeenRs0.029million(2014:Rs2.456million)higher/lower,mainlyasaresultofexchangegains/lossesontranslationofEurodenominatedfinancialinstruments.

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ii) Other price risk

Otherprice risk represents the risk that the fair valueor futurecash flowsofa financial instrumentwill fluctuatebecauseofchanges inmarketprices (other than thosearising from interest rate riskorcurrency risk),whether thosechangesarecausedbyfactorsspecifictotheindividualfinancialinstrumentoritsissuer,orfactorsaffectingallsimilarfinancialinstrumentstraded in themarket.Thegroup isnotmateriallyexposedtoequityprice risksincetherearenosignificant investments inequity instruments traded in themarket either classifiedas available-for-sale or at fair value throughprofit or loss at thereportingdate.Thegroupisalsonotexposedtocommoditypricerisksinceitdoesnotholdanyfinancialinstrumentbasedoncommodityprices.

iii) Interest rate risk

Interestrateriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.

The group’s interest rate risk arises from long term finances/loans, lease liabilities and short term borrowings. Borrowingsobtainedandloansprovidedatvariableratesexposethegrouptocashflowinterestraterisk.

Atthebalancesheetdate,theinterestrateprofileofthegroup’ssignificantinterestbearingfinancialinstrumentswas:


Fixed rate instruments:

Financial assets

Investment 43,278 38,589 Tradedebts 2,510,370 121,369 Bankbalances-savingaccounts 382,090 1,314,132

2,935,738 1,474,090

Financial liabilities – –

Net exposure 2,935,738 1,474,090

Floating rate instruments:

Financial assets – –

Financial liabilities

Longtermloansfromrelatedparties 2,232,952 825,968 Longtermfinances 3,113,375 2,108,499 Shorttermborrowingfromrelatedparty 2,200,000 3,000,000 Shorttermborrowings 15,451,553 4,920,913

22,997,880 10,855,380

Net exposure (22,997,880) (10,855,380)

Fair value sensitivity analysis for fixed rate instruments

Thegroupdoesnotaccountforanyfixedratefinancialassetsandliabilitiesatfairvaluethroughprofitorloss.Therefore,achangeininterestrateatthebalancesheetdatewouldnotaffectprofitorlossofthegroup.

Cash flow sensitivity analysis for variable rate instruments

If interest rates on variable rate financial instruments, at the year enddate, fluctuatesby 1%higher/lowerwithall othervariablesheldconstant,pretaxprofitfortheyearwouldhavebeenRs230.056million(2014:Rs100.284million)lower/higher,mainlyasaresultofhigher/lowerinterestexpenseonfloatingrateinstruments.

b) Credit risk

Creditriskrepresentstheriskoffinanciallossbeingcausedifcounterpartyfailstodischargeanobligation.

Creditriskofthegrouparisesfromcashandcashequivalentsanddepositswithbanksandfinancialinstitutions,aswellascreditexposurestocustomers, includingoutstandingreceivablesandcommittedtransactions.Themanagementassessesthecreditqualityofthecustomers,takingintoaccounttheirfinancialposition,pastexperienceandotherfactors.IndividualrisklimitsaresetbasedoninternalorexternalratingsinaccordancewithlimitssetbytheBoard.Theutilisationofcreditlimitsisregularlymonitoredandmajorsalestocustomersaresettledincash.Forbanksandfinancialinstitutions,onlyindependentlyratedpartieswithastrongcreditratingareaccepted.

Thegroupmonitorsthecreditqualityofitsfinancialassetswithreferencetohistoricalperformanceofsuchassetsandavailableexternalcreditratings.Thecarryingvaluesoffinancialassetswhichareneitherpastduenorimpairedareasunder:


Longterminvestments 107,510 102,821 Securitydeposits 28,554 34,534 Tradedebts 2,004,830 277,162 Advances,depositsandotherreceivables 130,556 728,931 Cashandbankbalances 530,820 1,428,962

2,802,270 2,572,410

Thegroup’sexposuretocreditriskislimitedtothecarryingamountofunsecuredtradereceivablesandbankbalances.Theageinganalysisoftradereceivablebalancesisasfollows:


Neitherpastduenorimpaired 2,004,830 277,162 Pastduebutnotimpaired:

1to90days 271,405 76,900 91to180days 176,205 13,419 181to270days 223,171 1,240 above270days 117,559 36,977

788,340 128,536

2,793,170 405,698

Themanagementestimatestherecoverabilityoftradereceivablesonthebasisoffinancialpositionandpasthistoryof itscustomersbasedontheobjectiveevidencethatitwillnotreceivetheamountduefromtheparticularcustomer.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethatthegroupwillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Significantfinancialdifficultiesofthedebtors,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Theprovisioniswrittenoffbythegroupwhenitexpectsthatitcannotrecoverthebalancedue.Anysubsequentrepaymentsinrelationtoamountwrittenoff,arecrediteddirectlytoprofitandlossaccount.

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Thecreditqualityofgroup’sbankbalancescanbeassessedwithreferencetoexternalcreditratingsasfollows:

Rating Rating 2015 2014 Short term Long term Agency (Rupees in thousand)

AlBarakaIslamicBankLimited A1 A PACRA 6,973 11,038 AlliedBankLimited A1+ AA+ PACRA 70 76 SummitBankLimited A-1 A JCR-VIS 224,536 279,786 BankAlfalahLimited A1+ AA PACRA 45,042 444,136 DeutscheBankAG A-2 BBB+ Standard&Poor’s 1,738 0.1 DubaiIslamicBankLimited A-1 A+ JCR-VIS 2 2 FaysalBankLimited A1+ AA PACRA 3,701 7,253 HabibBankLimited A-1+ AAA JCR-VIS 100,690 61,332 HabibMetropolitanBankLimited A1+ AA+ PACRA 99 558,166 MCBBankLimited A1+ AAA PACRA 5,387 2,127 MeezanBankLimited A-1+ AA JCR-VIS 1,865 12,208 NationalBankofPakistan A-1+ AAA JCR-VIS 605 5,166 StandardCharteredBank(Pakistan)Limited A1+ AAA PACRA 21,443 4,250 UnitedBankLimited A-1+ AA+ JCR-VIS 90,577 15,577 ZaraiTaraqiatiBankLimited A-1+ AAA JCR-VIS 59 58 BankIslamiPakistanLimited A1 A+ PACRA 10,701 12,180 SindhBankLimited A-1+ AA JCR-VIS 4,879 6,922 BurjBankLimited A-2 A- JCR-VIS 271 543 CitibankN.A. P-1 A2 MOODY’S 0.3 0.3 TheBankofPunjab A1+ AA- PACRA 7,210 2,315 KASBBankLimited A3 BBB JCR-VIS – 662

525,848 1,423,797

Duetothegroup’slongstandingbusinessrelationshipswiththesecounterpartiesandaftergivingdueconsiderationtotheirstrongfinancialstanding,managementdoesnotexpectnon-performancebythesecounterpartiesontheirobligationstothegroup.Accordingly,thecreditriskisminimal.

c) Liquidity risk

Liquidityriskistheriskthatanentitywillencounterdifficultyinmeetingobligationsassociatedwithfinancialliabilities.

Thegroup’sapproachtomanagingliquidityistoensurethat,asfaraspossible, italwayshassufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossorriskingdamagetothegroup’sreputation.

ThefollowingarethecontractualmaturitiesoffinancialliabilitiesasatDecember31,2015andDecember31,2014:

Carrying Less than One to More than amount one year five years five years As at December 31, 2015 (Rupees in thousand)

Longtermfinances 3,113,375 1,143,236 1,970,139 – Longtermloansfromrelatedparties 2,232,952 – 2,232,952 – Longtermdeposits 44,860 – – 44,860 Shorttermborrowingfromrelatedparty 2,200,000 2,200,000 – – Shorttermborrowings 15,451,553 15,451,553 – – Tradeandotherpayables 7,392,684 7,392,684 – – Accruedfinancecost 455,344 455,344 – –

30,890,768 26,642,817 4,203,091 44,860

Carrying Less than One to More than amount one year five years five years As at December 31, 2014 (Rupees in thousand)

Longtermfinances 2,108,499 972,404 1,136,095 – Longtermloansfromrelatedparties 825,968 – 825,968 – Importbillpayable 2,414,400 1,314,400 1,100,000 – Longtermdeposits 48,070 – – 48,070 Shorttermborrowingfromrelatedparty 3,000,000 3,000,000 – – Shorttermborrowings 4,920,913 4,920,913 – – Tradeandotherpayables 6,674,335 6,674,335 – – Accruedfinancecost 326,929 326,929 – –

20,319,114 17,208,981 3,062,063 48,070

44.2 Fair value estimation

Thecarryingvaluelessimpairmentprovisionoftradeandotherreceivables,andpayablesareassumedtoapproximatetheirfairvalues.Thefairvalueoffinancialliabilitiesfordisclosurepurposesisestimatedbydiscountingthefuturecontractualcashflowsatthecurrentmarketinterestratethatisavailabletothegroupforsimilarfinancialinstruments.Thecarryingvaluesofallfinancialassetsandliabilitiesreflectedinthefinancialstatementsapproximatetheirfairvalues.

44.3 Financial instruments by categories

Held to Loans and Total maturity receivables As at December 31, 2015 (Rupees in thousand)

Assetsasperbalancesheet Securitydeposits – 28,554 28,554 Tradedebts – 2,793,170 2,793,170 Advances,depositsandotherreceivables – 130,556 130,556 Investments 43,278 – 43,278 Cashandbankbalances – 530,820 530,820

43,278 3,483,100 3,526,378

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Financial Liabilities at amortized cost As at December 31, 2015 (Rupees in thousand)

Liabilitiesasperbalancesheet Longtermfinances 3,113,375 Longtermloansfromrelatedparties 2,232,952 Longtermdeposits 44,860 Shorttermborrowingfromrelatedparty 2,200,000 Shorttermborrowings 15,451,553 Tradeandotherpayables 7,392,684 Accruedfinancecost 455,344

30,890,768

Held to Loans and Total maturity receivables As at December 31, 2014 (Rupees in thousand)

Assetsasperbalancesheet Securitydeposits – 34,534 34,534 Tradedebts – 405,698 405,698 Advances,depositsandotherreceivables – 728,931 728,931 Investments 38,589 – 38,589 Cashandbankbalances – 1,428,962 1,428,962

38,589 2,598,125 2,636,714

Financial Liabilities at amortized cost As at December 31, 2014 (Rupees in thousand)

Liabilitiesasperbalancesheet Longtermfinances 2,108,499 Importbillpayable 2,414,400 Longtermloanfromrelatedparty 825,968 Longtermdeposits 48,070 Shorttermborrowingfromrelatedparty 3,000,000 Shorttermborrowings 4,920,913 Tradeandotherpayables 6,674,335 Accruedfinancecost 326,929

20,319,114

44.4 Offsetting financial assets and financial liabilities (a) Financial assets

Thefollowingfinancialassetsaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:


As at 31 December 2015 A B C = A + B D E = C + D Securitydeposits – – – – – 28,554 Tradedebt 2,793,170 – 2,793,170 – 2,793,170 – Advances,depositsandother receivables – – – – – 130,556 Investments – – – – – 43,278 Cashandbankbalances – – – – - 530,820 2,793,170 – 2,793,170 – 2,793,170


As at 31 December 2014 A B C = A + B D E = C + D Securitydeposits – – – – – 34,534 Tradedebts 410,807 (5,109) 405,698 – 405,698 – Advances,depositsandother receivables – – – – – 728,931 Investments – – – – – 38,589 Cashandbankbalances – – – – – 1,428,962 410,807 (5,109) 405,698 – 405,698 (b) Financial liabilities

Thefollowingfinancialliabilitiesaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:



As at 31 December 2015 A B C = A + B D E = C + D Longtermfinances – – – – – 3,113,375 Longtermloanfromrelatedparties – – – – – 2,232,952 Longtermdeposits – – – – – 44,860 Shorttermborrowingfromrelatedparty – – – – – 2,200,000 Shorttermborrowings – – – – – 15,451,553 Tradeandotherpayables 7,392,684 – 7,392,684 – 7,392,684 – Accruedfinancecost – – – – – 455,344 7,392,684 – 7,392,684 – 7,392,684

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As at 31 December 2014 A B C = A + B D E = C + D Longtermfinances – – – – – 2,108,499 Longtermloanfromrelatedparties – – – – – 825,968 Importbillpayable – – – – – 2,414,400 Longtermdeposits – – – – – 48,070 Shorttermborrowingfromrelatedparty – – – – – 3,000,000 Shorttermborrowings – – – – – 4,920,913 Tradeandotherpayables 6,679,444 (5,109) 6,674,335 – 6,674,335 – Accruedfinancecost – – – – – 326,929 6,679,444 (5,109) 6,674,335 – 6,674,335

44.5 Capital management

Thegroup’sobjectiveswhenmanagingcapitalaretosafeguardthegroup’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimalcapitalstructuretoreducethecostofcapital.Inordertomaintainoradjustthecapitalstructure,thegroupmayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholdersthroughrepurchaseofshares,issuenewsharesorsellassetstoreducedebt.Consistentwithothers in the industryandthe requirementsof the lenders, thegroupmonitors thecapital structureonthebasisofgearingratio.Thisratioiscalculatedasnetdebtdividedbytotalcapitalemployed.Netdebtiscalculatedastotalborrowings(includingcurrentandnon-currentborrowings) lesscashandcashequivalents.Totalcapital includesequityasshown in thebalancesheetplusnetdebt. Thegroup isnotexposedtoanyexternally imposedcapital requirements. ThegearingratiosasatDecember31,2015and2014wereasfollows:




Borrowings-note8,9,14&15 7,546,327 5,934,467 Cashandcashequivalents-note39 (14,920,733) (3,491,951)

Netdebt 22,467,060 9,426,418

Totalequity(includessurplusonrevaluationofoperatingfixedassets) 24,093,033 18,079,402 Gearingratio Percentage 48% 34%

2015 2014

45. Number of employees

TotalnumberofemployeesasatDecember31 1,065 983

Averagenumberofemployeesduringtheyear 995 1,006

46. Details of subsidiary

Nameofsubsidiary Accountingyearend Percentageofholding Countryofincorporation RelianceSacksLimited December31,2015 100% Pakistan

47. Date of authorization for issue ThesefinancialstatementswereauthorizedforissueonApril08,2016bytheBoardofDirectors.

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Pattern of Shareholding as at December 31, 2015Disclosure requirement under the code of corporate governance

Pattern of shareholding as at December 31, 2015 Category-Wise

Details of holding as on December 31, 2015: Shares held

1. Associated Companies, Undertakings and Related Parties RelianceCommodities(Pvt)Limited 7,136,613

AmirFineExports(Pvt)Limited 12,895,296 FatimaHoldingLimited 84,145,872 ArifHabibCorporationLimited 135,000,000

2. Mutual Funds –3. Directors and their spouse(s) and minor children

Mr.ArifHabib-Chairman 50,624,877 Mr.FawadAhmedMukhtar-CEO 12,499,995 Mr.RehmanNaseem 13,820,522 Mr.FazalAhmedShekih 30,943,236 Mr.FaisalAhmedMukhtar 30,943,236 Mr.NasimBeg 1 Mr.AbdusSamad 1 Mr.MuhammadKashif 1 Mrs.ZetunArif 39,375,120 Mrs.AmbreenFawad 3,577,410 MissMerajFatima 4,030,431 4. Executives –

5. Public Sector companies and corporations –

6. Banks, Development Finance Institutions, Non-Banking Finance Companies, Insurance Companies, Takaful, Modarabas and Pension Funds –

7. Shareholders holding five percent or more voting rights ArifHabibCorporationLimited 135,000,000

FatimaHoldingLimited 84,145,872 Mr.ArifHabib 50,624,877 Mrs.ZetunArif 39,375,120 Mr.FaisalAhmedMukhtar 30,943,236 Mr.FazalAhmedSheikh 30,943,236

Shareholding No. of Shareholders Total Shares held Percentage

From To

1 100 3 3 0.00

3,575,001 3,580,000 1 3,577,410 0.79

4,030,001 4,035,000 4 16,121,724 3.58

6,455,001 6,460,000 2 12,916,096 2.87

7,135,001 7,140,000 1 7,136,613 1.59

12,495,001 12,500,000 1 12,499,995 2.78

12,895,001 12,900,000 1 12,895,296 2.87

13,820,001 13,825,000 1 13,820,522 3.07

30,940,001 30,945,000 2 61,886,472 13.75

39,375,001 39,380,000 1 39,375,120 8.75

50,620,001 50,625,000 1 50,624,877 11.25

84,145,001 84,150,000 1 84,145,872 18.70

134,995,001 135,000,000 1 135,000,000 30.0

Total 20 450,000,000 100

CategoriesofShareholders SharesHeld Percentage

Directors,ChiefExecutiveOfficer,andtheirspouseandminorchildren 185,814,830 41.29

AssociatedCompanies,undertakingsandrelatedparties 239,177,781 53.15

Executives – –

PublicSectorCompaniesandCorporation – –

Banks,DevelopmentFinancialInstitutions,NonBankingFinancialInstitutions,

InsuranceCompanies,Takaful,ModarabasandPensionFunds – –

MutualFunds – –

GeneralPublic

a.Local – –

b.Foreign – –

Others 25,007,389 5.56

Total 450,000,000 100.00

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Financial Calendar

Thefinancialresultswillbeannouncedasperthefollowingtentativeschedule:

43rd Annual General Meeting

43rd 30, 2016

2016.

AnnualGeneralMeeting April30,2016

1stQuarterendingMarch31,2016 ThirdweekofApril,2016

2nd QuarterendingJune30,2016 ThirdweekofAugust,2016

3rdQuarterendingSeptembt30,2016 LastweekofOctober,2016

YearendingDecember31,2016 FourthweekofJanuary,2017

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ANNUAL REPORT 2015

The Company Secretary

HIGHNOON LABORATORIES LIMITED

17.5 Kilometer, Multan Road,

Lahore - 53700 Pakistan.

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